ABC Company acquired some land (independently appraised at $12,000) and paid for
ID: 1168279 • Letter: A
Question
ABC 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 transaction be reported on the Statement of Cash Flows (SCF)?
Question 1 options:
Reported $10,000 as a noncash investing and financing activity on the SCF.
Report the $12,000 as an inflow of cash on the SCF.
Report the $12,000 as a non cash activity.
Reported $10,000 as a noncash investing and financing activity on the SCF.
Report the $12,000 as an inflow of cash on the SCF.
Report the $12,000 as a non cash activity.
Explanation / Answer
Since the activity involved paying the required amount through stock, its a non-cash activity. Cash activities are those that require the end user to pay the required amount in the form of liquid money. On the contrary, in the non-cash payments, bonds, debentures and stocks are used.