Land Transactions on the Statement of Cash Flows
Easterly Corporation purchased land for $185,000. Later in the year, the company sold a different piece of land with a book value of $94,000 for $84,000.
How are the effects of these transactions reported on the statement of cash flows? Use the minus sign to indicate cash outflows, cash payments, decreases in cash and for any adjustments, if required. If a transaction has no effect on the statement of cash flows, select "No effect" from the drop down menu and leave the amount box blank.
Transactions | Action | Amount |
Gain or loss on sale of land | $ | |
Cash received from sale of land | $ | |
Cash paid for purchase of land |
The item-wise classification is as below:
Particulars | Formula | Amount | Action |
Loss from sale of Land | (94,000-84,000) | 10,000 | Since, the loss from sale of Land is non-cash item i.e. no cash inflow or outflow happens, the loss is added to the net income under Cash flow from Operating Activities. This is done to set off the effect of income from sale of land under Investing Activities. |
Cash received from Sale of Land | 84,000 | 84,000 | It is shown under the Cash flow from Investing Activities of Cash Flow Statement. Since, the cash is received from sale of land, hence, the same is shown as a positive item or receipt of cash. |
Cash paid for purchase of Land | -1,85,000 | -1,85,000 | It is shown under the Cash flow from Investing Activities of Cash Flow Statement. Since, the cash is paid for purchase of land, hence, the same is shown as a negative item or payment in cash. |
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