Answer:
Sale of building:
<u>journal entry: </u>
cash 8,800 debit
acc dep building 20,800 debit
loss at disposal 2,400 debit
building 32,000 credit
cash generated from investing activities: 8,800
<u>Purchase of Machine</u>
journal entry:
machinery 10,800 debit
note payable 10,800 credit
no cash involve no effect on cash flow statement
<u>issuance of shares:</u>
journal entry:
cash 2,160 debit
common stock 2,160 credit
cash generated from financing activities: 2,160
<u>note payable redemption:</u>
note payable 40,400 debit
loss on redemption 7,400 debit
Cash 7,400 credit
cash used for financing activities: 47,800
Explanation:
Sale of building:
we write-off the assets along with his depreciation and enter the proceed at disposal. We also need to recognzie the gain/loss for the difference:
32,000 - 20,800 = 11,200
procceds (8,800)
result 2,400 loss
cash flow effect: investing activities: 8,800
Purchase of Machine
we record the asset received and the liability issued to get it.
no cash involve no effect on cash flow statement
issuance of shares:
1,080 shares x $2 each = 2,160 this is the amount of the shares and the cash proceeds.
financing for the cash proceeds: 2,160
note payable redemption:
we write-off the liability, we credit the cahs used and recognize the loss.
cash used for financing for 47,800
