Asked by Inderpreet Bains on Apr 30, 2024
Verified
In the Garnet Company the beginning and ending balances in Land were $198000 and $240000 respectively. During the year land costing $50000 was sold for $50000 cash and land costing $92000 was purchased for cash. The entries in the reconciling columns of the worksheet will include a:
A) credit to Land $50000 and a debit to Sale of Land $50000 under investing activities.
B) debit to Land $92000 and a credit to Purchase of Land $92000 under financing activities.
C) net debit to Land $42000 and a credit to Purchase of Land $42000 under investing activities.
D) credit to Land $50000 and a debit to Sale of Land $50000 under financing activities.
Investing Activities
Parts of a company's cash flow statement that show the amount of money spent or received from investments in assets, securities, and other financial instruments.
Reconciling Columns
Columns used in a reconciliation process to adjust the differences between two sets of records for accuracy.
Land Costing
The total expenditure associated with acquiring land, including purchase price, closing costs, and preparation expenses.
- Understand the presentation and significance of noncash activities in financial statements.
Verified Answer
ZK
Zybrea KnightMay 05, 2024
Final Answer :
A
Explanation :
CThe correct answers are A and C. In A, the sale of land for cash is correctly classified as an investing activity, with a credit to Land for the cost of the land sold ($50,000) and a corresponding debit to Sale of Land, reflecting the cash inflow from the sale. In C, the net change in the Land account is a debit of $42,000, which is the difference between the purchase of land costing $92,000 and the sale of land costing $50,000. This net amount is correctly classified under investing activities, reflecting the net cash outflow for land transactions.
Learning Objectives
- Understand the presentation and significance of noncash activities in financial statements.