Question

For each of the following separate transactions: Sold a building costing $39,000, with $23,600 of accumulated depreciation, for $11,600 cash, resulting in a $3,800 loss. Acquired machinery worth $13,600 by issuing $13,600 in notes payable. Issued 1,360 shares of common stock at par for $2 per share. Note payables with a carrying value of $41,800 were retired for $50,600 cash, resulting in a $8,800 loss. (a) Prepare the reconstructed journal entry. (b) Identify the effect it has, if any, on the investing section or financing section of the statement of cash flows.

Answer 1

Date General Journal Debit Credit

Cash $11,600

Accumulated dep - Building $23,600

Loss on sale of assets $3,800

Building $39,000

(To record sale of building)

Machinery $13,600

Note payable $13,600

(To record acquisition of machinery)

Cash $2,720

Common stock $2,720

(To record issuance of common stock)

Note payable $41,800

Loss on retiring of debt $8,800

Cash $50,600

(To record payment of cash to retire debt)

2. Cash flow from investing activities

Cash received from sale of building $11,600

Net cash provided by investing activities $11,600

Cash flow financing activities

Cash received from issuance of common stock $2,720

Cash paid to retire note $(50,600)

Net cash used by financing activities $(47,880)