The Opening Balance in the Land Account for Adara Corp

question 11

Essay

The opening balance in the land account for Adara Corp for fiscal 2017 was $500,000; the closing balance was $610,000.During the year land costing $130,000 was given to a creditor in full settlement of a $152,000 loan.The fair value of the land at the time of the exchange was $152,000.The company also purchased a separate parcel of land for cash during the year.
Required:
a.Prepare the underlying journal entries to record the foregoing transactions and record events stemming from the transactions (e.g.,the accrual of interest at year-end).
b.For each entry identify the cash flow effects,if any,under both the direct and indirect methods of presentation and classify the cash flow according to its nature.
c.Why does the IASB require that companies classify cash flows as arising from operations,investing,or financing activities?

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Definitions:

Final Goods

Goods that have completed the manufacturing process and are available for sale to the end user or consumer, as opposed to intermediate goods used in production.

Gross Domestic Product

The total value of all goods and services produced within a country's borders in a specific time period, serving as a broad indicator of economic health.

Real GDP

The measure of a country's economic output adjusted for price changes, reflecting the true value of goods and services produced.

Aggregate Production

The total value of goods and services produced within an economy over a specific period.