Would really appreciate if someone could walk be through how a purchase of, for example, $100 of land affects the 3 financial statements. Understand that it doesn't impact the IS, but want to understand the intuition behind it. Also, would appreciate how this relates to other indefinite useful life assets like trademarks.
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Income statement:
No impact
Balance Sheet - Assets:
Land goes up by $100; Cash goes down by $100
Cashflow statement - Cash from investing:
Cash outflow of $100
Greatly appreciate it. If you have time, would really be grateful if you could explain intuition behind it (latter half of my question) in a handful of sentences.
This…Land typically doesn’t depreciate so the next year would be same if purchased with cash. If purchased with debt you would still +$100 to land on asset side but then you’d +$100 debt. CF statement would be offsetting: ($100) cash from investing +$100 cash from financing. The debt changes the statements next year because you have int expense. Just giving you the idea that there are multiple ways to finance the land which would change the statements down the road.
I could. For certain. Like, it wouldn't even be difficult for me. Literally would be quicker than the answer I'm typing. But I wont. Why? Idk. Guess I'm just one of those people who wants to see the world burn.
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