Boone Sales Company had the following balances in its accounts on January 1, 2005:

Boone experienced the following events during 2005:
1. Sold merchandise inventory that cost \($16,000\) for \($27,000\).
2. Sold land that cost \($20,000\) for \($35,000\).

Required:

a. Determine the amount of gross margin recognized by Boone.

b. Determine the amount of the gain on the sale of land recognized by Boone.

c. Comment on how the gross margin versus the gain will be recognized on the income statement.

d. Comment on how the gross margin versus the gain will be recognized on the statement of cash flows.

Transcribed Image Text:

Merchandise Inventory Cash Land Common Stock Retained Earnings $30,000 20,000 50,000 40,000 60,000