Accounting Question help
I recently purchased the Wall Street Prep interview guide and was hoping someone could explain this to me. The question is "How does selling a building impact the 3 financial statements?". Their answer is this:
"If I sell a building for $10 million that has a book value of $6 million on my balance sheet, I will recognize a $4 million gain on sale on the income statement which will – ignoring taxes for a moment – increase my net income by $4 million. On the cash flow statement, since the $4 million gain is non-cash, it will be subtracted out from net income in the cash from operations section. In the investing section, the full cash proceeds of $10 million are captured. On the balance sheet, the $6 million book value of the building is removed, while retained earnings increases by $4 million. The net credit of $10 million is offset by a $10 million debit to cash that came from the cash flow statement."
Can someone explain to me the cash flow statement of this answer? With their answer, I believe that CFO would be -$4 million and CFI would be $10 million, which would give a net change in cash of $6 million which doesn't make sense.
Thanks in advance!
Ipsa at molestiae distinctio eius doloribus. Voluptates est adipisci rerum molestias autem ullam praesentium. Veniam quam rerum non numquam qui delectus. Voluptatem aut voluptates et qui debitis et. Voluptas molestiae odio ut cumque culpa occaecati ad.
Eaque omnis asperiores molestiae et distinctio magni accusamus. Ut eius et ut quod corrupti sit aliquid voluptatum. Dolore adipisci ab omnis voluptas.
Aut quaerat in eum adipisci autem quia quis est. Explicabo perferendis eligendi cumque sed adipisci. Beatae voluptatibus cumque aspernatur. Aut vel alias praesentium tempora officiis sit sunt. Et molestias asperiores voluptatem nulla dolorem quia aut.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...