Asked by pizza and spagghetti on Jun 06, 2024
Verified
A company acquired some land (independently appraised at $12,000) and paid for it by issuing 1,000 shares of its common stock (par $10 per share;no market price was quoted) .How should this be reported on the statement of cash flows?
A) Report $12,000 as inflow and outflow of cash.
B) Report $12,000 as an inflow of cash.
C) The transaction should not be reported on the statement of cash flows.
D) Report in a schedule of significant noncash investing and financing activities.
Statement of Cash Flows
A report detailing how modifications in balance sheet accounts and earnings influence cash and cash equivalents.
Common Stock
A type of securities representing ownership in a corporation, whereby holders have voting rights and may receive dividends.
Noncash Investing
Investment activities that do not involve the immediate inflow or outflow of cash, such as acquiring assets through the issuance of equity.
- Recognize key noncash financing and investing activities along with comprehending the necessities of their reporting.
Verified Answer
BT
Bahaa TalatJun 12, 2024
Final Answer :
D
Explanation :
This transaction involves a noncash investing activity (issuing common stock) to acquire the land. Therefore, it should be reported in a schedule of significant noncash investing and financing activities in the statement of cash flows.
Learning Objectives
- Recognize key noncash financing and investing activities along with comprehending the necessities of their reporting.