A large west coast manufacturing firm has significant holdings of land because t
ID: 2569579 • Letter: A
Question
A large west coast manufacturing firm has significant holdings of land because the products it manufactures require large manufacturing facilities. Recall that for accounting purposes, a tract of land is included in the Land account only if the land is used in the business. Land held as an investment is not included in the Land account but rather is included in Investments, which is not property, plant and equipment. For the year, the firm’s Land account increased from $800,000 (beginning balance) to $3,200,000 (ending balance). During the year, the firm sold $1,200,000 (original cost) of Land. No investments in land were purchased or sold during the year. Determine the amount of the investing cash outflow.
a. 3,200,000
b. 3,600,000
c. 1,200,000
d. 2,800,000
e. 0
a. 3,200,000
b. 3,600,000
c. 1,200,000
d. 2,800,000
e. 0
Explanation / Answer
During the year there is only one transaction i,e sale of land for $1,200,000
Therefore cash flow is 1,200,000 only
Option (D) 1,200,000 is correct.
Note: land value eventhogh increased there is no cashflow in hand.
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