PE 16-5A Land transactions on the statement of cash flows

Rainbow Corporation purchased land for $360,000. Later in the year, the company sold a different piece of land with a book value of $180,000 for $120,000. How are the effects of these transactions reported on the statement of cash flows?


Answer:

The loss on the sale of land is added to net income in the Operating Activities section.
Loss on sale of land……………………………………….…………………………… $ 60,000
The purchase and sale of land is reported as part of cash flows from investing
activities as shown below.
Cash received from sale of land…………………...………………………………… 120,000
Cash paid for purchase of land……………………………...………………………… (360,000)