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

IZ Corporation purchased land for $400,000. Later in the year, the company sold a different piece of land with a book value of $200,000 for $240,000. How are the effects of these transactions reported on the statement of cash flows?


Answer:

The gain on the sale of land is subtracted from net income in the Operating Activities
section.
Gain on sale of land………………………….………………………………………… $ (40,000)
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…………………..…………………………………… 240,000
Cash paid for purchase of land………………………..……………………………… (400,000)