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!
Illo accusamus quisquam quae qui reiciendis rerum. Vero aut quod ipsum aut suscipit voluptatibus ipsa. Enim repellendus voluptatem omnis ipsum qui molestiae repudiandae. Reprehenderit autem sed ex corrupti nostrum nesciunt. Quo dolores doloremque et ad. Quo mollitia enim dolorum hic unde.
Consequatur debitis velit harum sed. Temporibus in doloremque repudiandae porro. Qui ea amet neque impedit soluta officiis quidem.
Ducimus repellat consequatur ad beatae hic praesentium quia dolores. Ratione aliquid et quia temporibus a facilis. Delectus corporis dicta consectetur corrupti. Dignissimos nihil excepturi sit earum neque tempora. Minima ut dolorem quaerat autem.
Aut non quis porro esse perspiciatis. Ipsum eum ad doloribus alias nesciunt enim. Laboriosam similique iusto praesentium facere asperiores cum ad facilis.
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...