On January 1, 2013, Liken Enterprises purchased a parcel of land for $20,000 cash. At the time of purchase, the company planned to use the land for future expansion. In 2014, Liken Enterprises changed its plans and sold the land.
Required:
a. Assume that the land was sold for $22,500 in 2014.
(1) Show the effect of the sale on the accounting equation.
(2) What amount would Liken report on the income statement related to the sale of the land?
(3) What amount would Liken report on the statement of cash flows related to the sale of the land?
b. Assume that the land was sold for $18,500 in 2014.
(1) Show the effect of the sale on the accounting equation.
(2) What amount would Liken report on the income statement related to the sale of the land?
(3) What amount would Liken report on the statement of cash flows related to the sale of the land?