Question

Reporting Land Transactions on Statement of Cash Flows

On the basis of the details of the following fixed asset account, indicate the items to be reported on the statement of cash flows:
ACCOUNT Land ACCOUNT NO.
Balance
Date Item Debit Credit Debit Credit
Jan. 1 Balance 1,223,000
Mar. 12 Purchased for cash 404,000 1,627,000
Oct. 4 Sold for $222,000 190,000 1,437,000
Item Section of Statement of
Cash Flows Added or Deducted Amount
Mar. 12: Purchase of fixed asset Investing activities section Deducted $
Oct. 4: Sale of fixed asset Investing activities section Added $
Gain on sale of fixed asset (assume the indirect method) Operating activities section Deducted $

Answer 1

Answer: Please see below

Step-by-step explanation:

Date Item Debit Credit Debit Credit

Jan. 1 Balance 1,223,000

Mar. 12 Purchased

for cash 404,000 1,627,000

Oct. 4 Sold for

$222,000 190,000 1,437,000

items Section for statement Added or Amount

of Cash flows Deducted

Mar. 12: Purchase

of fixed asset Investing activities Deducted$404,000

Oct. 4: Sale of

fixed asset Investing activities Added $222,000

Gain on sale of

fixed asset Operating activities Deducted $32,000

(assume the indirect method)

Sale of asset - credit of 190,000

=$222,000 -$190,000= 32,000.

According to indirect method,The statement of cash flows involves adjusting the net income to changes in balance sheet accounts to determine amount of cash accrued by operating activities.

Cash flows In the indirect method format follows the general classification of

-Cash flows from operating activities

-Cash flows from investing activities

-Cash flows from financing activities

Here, purchase of land would be an investing activity and would be deducted from net income.Sale of land would be an investing activity but added to net income and a gain on asset would be under operating activities and deducted from net income