For a gain on sale of land, how would you book the transaction? Let's say the...

For a gain on sale of land, how would you book the transaction?

Let's say the property was purchased for 100,000 (no depreciation because it's land) and sold 3 years later for $175,000. Please show the journal entries upon acquisition and disposition. Would this be a capital gain or ordinary gain? Do you have enough facts to answer if it would be capital or ordinary?

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Expert Solution

On purchase

Land A/c Dr $100000

To Cash or Bank $100000

On sale

Bank or cash A/c Dr $175000

To Land $100000

To gain on sale of land (P&L) $75000

As Land is a capital asset which is not purchased for a intention to sale in ordinary course of business by many business, so gain on sale of land is a capital gain. But in case of realestate business it is an ordinary gain

ekkarill92 answered 1 year ago

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