Question

On July 15, 2018, M.W. Morgan Distribution sold land for $52.5 million that it had purchased...

On July 15, 2018, M.W. Morgan Distribution sold land for $52.5 million that it had purchased in 2013 for $38.0 million. What would be the amount(s) related to the sale that Morgan would report in its statement of cash flows for the year ended December 31, 2018, using the direct method? The indirect method?

Homework Answers

Answer #1

The amount of sale that Morgan would report in its statement of cash flow for the year ended Dec 31, 2018 is the sale value of land as Proceeds from Sale of Land = $52.5 millions under the Cash Flow from Investing Activities.

The method (Direct or Indirect) to prepare cash flow statement does not affect Cash Flow from Investing Activities. These methods affect only Cash Flow from Operating Activities.

Below is the detail which will be shown in Cash Flow from Operating Activities related to sale of land using only INDIRECT METHOD

Gain from Sale of Land ($14.5 millions = 52.5 - 38) is deducted from Net Income and shown under Cash Flow from Operating Activities while using Indirect Method.

Under Direct method, there Gain from sale of land is not shown in Cash Flow from Operating Activities.

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