Question

In Marigold Company, there was an increase in the land account during the year of $43100. Analysis reveals that the change resulted from a cash sale of land at cost $114200, and a cash purchase of land for $159000. In the statement of cash flows, the change in the land account should be reported in the investment section __________.

Answer 1

$44,800 as an outflow.

Step-by-step explanation:

The Company's activities are classed as operating, investing and financing activities in the statements of cash flows.

The investing activities section is where the purchase of fixed assets such as land and the amount received for the sale of such assets are accounted for.

The purchase of land is an outflow of cash while the receipt from a sale of land is an inflow of cash

Hence net amount to be reported in the investment section

= $114200 - $159000

= -$44,800

This is a net outflow of cash.