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A manufacturing company owned land that was purchased in 2005 for $300,000. During 2015, the land was sold for $750,000. What will be included in the 2015 income statement?

A) This information would not be included in the income statement as it does not impact the company's wealth.
B) Gain on sale of $450,000.
C) Revenue of $750,000 and cost of sales of $300,000.
D) A cash inflow of $750,000 in the investing section of the income statement.

User Bujar
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1 Answer

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Final answer:

The correct information to include in the 2015 income statement for the sale of the land is a gain on sale of $450,000, which is the difference between the sale price and the original purchase price.

Step-by-step explanation:

The student has presented a scenario in which a manufacturing company has sold land in 2015 that was originally purchased in 2005. When land or any other fixed asset is sold by a company, the transaction is recognized in the financial statements in accordance with generally accepted accounting principles (GAAP). Specifically, the gain or loss from the sale of an asset is included in the income statement as it affects the company's net income for that period.

In this case, the land was purchased for $300,000 and sold for $750,000. Therefore, the correct answer to the question, "What will be included in the 2015 income statement?," is B) Gain on sale of $450,000. This is calculated by subtracting the original purchase price ($300,000) from the selling price ($750,000). This gain reflects an increase in the company's wealth due to the sale of the land and is recognized in the income statement as a gain, not as revenue from normal business operations.

User Robzero
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