1. a. Assume that the land was sold for $34,500 in Year 3.
On January 1, Year 1, Elson Distributors purchased a parcel of land for $30,000 cash. At the time of purchase, the company planned to use the land for future expansion. In Year 3, Elson Distributors changed its plans and sold the land.
Required
a. Assume that the land was sold for $34,500 in Year 3.
(1) Show the effect of the sale on the accounting equation.
(2) What amount would Elson report on the income statement related to the sale of the land?
(3) What amount would Elson report on the statement of cash flows related to the sale of the land?
b. Assume that the land was sold for $27,500 in Year 3.
Narration/Animation Script: In this exercise, we will show how the sale of land for a gain or loss will affect the accounting equation, the income statement, and the statements of cash flows.