Final answer:
The purchase of land for $147,000 is reported as a cash outflow in the investing activities section of the statement of cash flows. The sale of land for $215,000 with a book value of $192,000 is reported as a cash inflow in the investing activities section, with a $23,000 gain subtracted from net income in the operating activities section to reconcile net income to net cash provided by operating activities.
Step-by-step explanation:
When a company like Lamar Corporation engages in the purchase and sale of assets such as land, it must accurately report these transactions in the statement of cash flows using the indirect method.
In the situation described, Lamar Corporation purchased land for $147,000, which represents an outflow of cash and would be listed in the investing activities section.
Later in the year, it sold land with a book value of $192,000 for $215,000. This transaction would result in a gain of $23,000 ($215,000 selling price minus $192,000 book value) and would be included in the investing activities section as well. The cash inflow from the sale is $215,000.
However, because the sale resulted in a gain, on the indirect method statement of cash flows, the $23,000 gain would be subtracted from the net income in the operating activities section to reconcile net income to net cash provided by operating activities, since the gain increased net income but did not involve cash received from operating activities.
The net effect on the statement of cash flows would show a cash outflow of $147,000 for the purchase of land and a cash inflow of $215,000 from the sale of land.