A company acquired some land (independently appraised at $12,000)and paid for it by issuing 1,000 shares of its common shares (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)Should not be reported on the statement of cash flows.
D)Report on a schedule of significant noncash transactions if it is material.

Question

Quizplus · Accepted Answer

The acquisition of land through the issuance of common shares is a significant noncash transaction and should be reported on a schedule of significant noncash transactions, if material. Therefore, option D is the best choice. Reporting $12,000 as an inflow or outflow of cash would be incorrect since there was no actual cash inflow or outflow. Option C is also incorrect, as even though no actual cash was involved, the transaction is still significant and should be disclosed.

A Company Acquired Some Land (Independently Appraised at $12,000)and Paid