# 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? BuyFindarrow_forward ### Financial Accounting 15th Edition Carl Warren + 2 others Publisher: Cengage Learning ISBN: 9781337272124 #### Solutions Chapter Section BuyFindarrow_forward ### Financial Accounting 15th Edition Carl Warren + 2 others Publisher: Cengage Learning ISBN: 9781337272124 Chapter 16, Problem 5PEB Textbook Problem 5 views ## 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?

To determine

Explain the effect of the given transactions reported on the statement of cash flows.

### Explanation of Solution

Statement of cash flows: It is one of the financial statement that shows the cash and cash equivalents of a company for a particular period. It determines the net changes in cash through reporting the sources and uses of cash due to the operating, investing, and financing activities of a company.

Cash flows from operating activities: These are the cash produced by the normal business operations.

Indirect method: Under this method, the following amounts are to be adjusted from the Net Income to calculate the net cash provided from operating activities.

The below table shows the way of calculation of cash flows from operating activities:

 Cash flows from operating activities (Indirect method) Â Add: Decrease in current assets Â Â Â Â Â Â Â Â  Increase in current liability Â Â Â Â Â Â Â Â  Depreciation expense and amortization expense Â Â Â Â Â Â Â Â  Loss on sale of plant assets Â Deduct: Increase in current assets Â Â Â Â Â Â Â Â Â Â Â Â Â  Decrease in current liabilities Â Â Â Â Â Â Â Â Â Â Â Â Â  Gain on sale of plant assets Net cash provided from or used by operating activities

Cash flows from investing activities: Cash provided by or used in investing activities is a section of statement of cash flows. It includes the purchase or sale of equipment or land, or marketable securities, which is used for business operations...

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