Question

For each of the following separate transactions,

(a) prepare the reconstructed journal entry and
(b) identify the effect it has, if any, on the investing section or financing section of the statement of cash flows.
1. Sold a building costing $30,000, with $20,000 of accumulated depreciation, for $8,000 cash, resulting in a $2,000 loss.
2. Acquired machinery worth $10,000 by issuing $10,000 in notes payable.
3. Issued 1,000 shares of common stock at par for $2 per share.
4. Notes payable with a carrying value of $40,000 were retired for $47,000 cash, resulting in a $7,000 loss

Answer 1

Answer: The answer is provided below

Step-by-step explanation:

a. The reconstructed journal entry has been prepared and attached.

b. The following are the effects it has on the investing section or the financing section of the statement of cash flows.

The first transaction will lead to a cash inflow of $8,000 from the investing activities.

The second transaction is non-cash transaction therefore, it will not be reported in either the financing or the investing activities.

The third transaction will lead to a cash inflow of $2,000 from the financing activities.

The fourth transaction will lead to a cash outflow from the financing activities.

Thw diagram has been attached.