Definition of Sale of Land
Assume that a retailer sells land that it had been holding for a future store. The retailer must remove the cost of the land from its general ledger asset account Land, record the cash received, and record the gain or loss on the sale of the land.
Example of Sale of Land
Assume that the retailer had purchased the parcel of land 15 years earlier for $200,000 in order to add another retail store. The retailer now decides to sell the parcel for $500,000.
Since there was no depreciation on the land, the retailer records the sale as follows:
- Credit to its Land account for its cost of $200,000
- Debit to its Cash account for the $500,000 it received
- Credit to the income statement account Gain on Sale of Real Estate for $300,000