Question

For each of the following separate transactions: Sold a building costing $38,500, with $23,400 of accumulated depreciation, for $11,400 cash, resulting in a $3,700 loss. Acquired machinery worth $13,400 by issuing $13,400 in notes payable. Issued 1,340 shares of common stock at par for $2 per share. Note payables with a carrying value of $41,700 were retired for $50,400 cash, resulting in a $8,700 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

Both requirements are solved below

Step-by-step explanation:

REQUIREMENT A:

Sale of a building Debit Credit

Cash $11,400

Acc Depreciation $23,400

Loss on disposal $3700

Building $38,500

Acquisition of Machinery Debit Credit

Machinery $13,400

Notes $13,400

Issuance of share Debit Credit

Cash(1340x2) $2,680

Share Capital $2,680

Retired Debt Debit Credit

Note payable $41,700

Loss on retirement $8,700

Cash $50,400

REQUIREMENT B:

Cash flow from investing activities

Gain on disposal of building $11,400

Net cash flow from investing activities $11,400

Cash flow from financing activities

Cash received from issuing shares $2,680

Cash paid for retirement of debt ($50,400)

Net cash flow from investing activities ($47,720)