Effect of gains and losses on the accounting equation and financial statements
On January 1,2011, Gert Enterprises purchased a parcel of land for $12,000 cash. At the time of purchase, the company planned to use the land for future expansion. In 2012, Gert Enterprises changed its plans and sold the land.
Required
a. Assume that the land was sold for $11.200 in 2012.
(1) Show the effect of the sale on the accounting equation.
(2) What amount would Gert report on the income statement related to the sale of the land?
(3)What amount would Gert report on the statement of cash flows related to the sale of the land?
b. Assume that the land was sold for $13,500 in 2012.
(1) Show the effect of the sale on the accounting equation.
(2) What amount would Gert report on the income statement related to the sale of the land?
(3) What amount would Gert report on the statement of cash flows related to the sale of the land?
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