Willems Ltd. (Willems) owns a piece of land that cost $100,000. Willems recently sold the land for $75,000. The buyer paid $50,000 in cash and will pay the remainder in 14 months.

a. What is the gain or loss on the sale of the land?
b. What is the effect of the sale on Willems' cash?
c. How would this transaction affect the cash flow statement? Respond assuming Willems uses
(i) The indirect method of calculating CFO and
(ii) The direct method of calculating CFO.
d. What would be the effect on CFO if the gain or loss was adjusted for, if Willems used the indirect method?
e. Discuss how the sale of the land is accounted for in the cash flow statement? Can you think of other ways that the transaction could be presented? Which approach do you think is best? Explain.

  • CreatedFebruary 26, 2015
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