Question

For each of the following separate transactions: 1. Sold a building costing $35,500, with $22,200 of accumulated depreciation, for $10,200 cash, resulting in a $3,100 loss. 2. Acquired machinery worth $12,200 by issuing $12,200 in notes payable. 3. Issued 1,220 shares of common stock at par for $2 per share. 4. Note payables with a carrying value of $41,100 were retired for $49,200 cash, resulting in a $8,100 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. Complete this question by entering your answers in the tabs below. Required A Required B Identify the effect it has, if any, on the investing section or financing section of the statement of cash flows. (Amounts to be deducted should be indicated by a minus sign.) Statement of Cash Flows (partial) Cash flows from investing activities Cash received from sale of Building 10,200 Cash flows from financing activities Cash received from issuing stock $ 49,200 < Required A

Answer 1

Required A:

Journal entries

1.	Sale of Building
	Cash	$10,200
	Accumulated depreciation on building	$22,200
	Loss at disposal	3,100
	Building		$35,500
2.	Purchase of machine
	Machinery	$12,200
	Notes payable		$12,200
3.	Issuance of stock
	Cash (1,220×2)	$2,440
	Common stock		$2,440
4.	Notes payable redemption
	Notes payable	$41,100
	Loss on redemption	$8,100
	Cash		$49,200

Required B:

Statement of cash flows (partial)

Cash flows from investing activities
Cash received from sale of Building	$10,200
Net cash flow from investing activities		$10,200
Cash flows from Financing activities
Cash received from issuance of stock	$2,440
Cash issued for notes payable redemption	($49,200)
Net cash flow from Financing activities		($46,760)

* For the purchase of machinery there is no cash involved so there is no effect on cash flows

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