Question

on the comparative balance sheets: LAND previous year : 60 million  current year: 78 million  * purchase of land for...


on the comparative balance sheets:

LAND previous year : 60 million  current year: 78 million 

* purchase of land for 28 million

*sold portion of land was sold for 14 million in cash. This land was originally purchased in a previous year for 10 million; therefore a gain on the sale of land of 4 million.

How is this information supposed to be entered on the Statement of cash Flows?

Answer

Purchase and sale proceeds of fixed asset is shown in the investing activities of cash flow statement whereas any loss or gain on sale of fixed asset is shown in the operating activities of the cash flow statement . 

Cash flow statement  
Cash flow from operating activities  
Net income  
Gain from the sale of land  - 4 million
   
Cash flow from investing activities  
Purchase of land  - 28 million
Proceeds from sale of land   + 14 million

The given information will affect both cash flow from operating activities and investing activities. Purchase and sale proceeds of fixed asset ( in given question Land ) is shown in the investing activities of cash flow statement whereas any loss or gain on sale of fixed asset is shown in the operating activities of the cash flow statement . 

Purchase of Land will lead to outflow of cash and therefore reduced from investing activity.

Proceeds from sale of land will increase the cash ( inflow ) and therefore increased in the investing activity

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