Scotty Company reported the following information at the end of 2011 and 2012: An analysis of Scotty's records indicated that there were no cash flow effects resulting from the changes in the two accounts presented above. How should Scotty report the changes in these accounts on a statement of cash flows?
A) Scotty should report $200,000 for the acquisition of land as an investing activity and $200,000 for the issuance of stock as a financing activity.
B) Scotty should report $200,000 as a noncash investing and financing activity for the acquisition of land by issuing common stock.
C) Scotty should report the issuance of common stock to acquire land in the financing activity section with a net cash flow effect of zero.
D) Scotty should report the acquisition of land by issuing common stock in the investing activity section with a net cash flow effect of zero.

Question

Scotty Company reported the following information at the end of 2011 and 2012:  An analysis of Scotty's records indicated that there were no cash flow effects resulting from the changes in the two accounts presented above. How should Scotty report the changes in these accounts on a statement of cash flows?
A) Scotty should report $200,000 for the acquisition of land as an investing activity and $200,000 for the issuance of stock as a financing activity. 
B) Scotty should report $200,000 as a noncash investing and financing activity for the acquisition of land by issuing common stock. 
C) Scotty should report the issuance of common stock to acquire land in the financing activity section with a net cash flow effect of zero. 
D) Scotty should report the acquisition of land by issuing common stock in the investing activity section with a net cash flow effect of zero.

Quizplus · Accepted Answer

The Answer of Scotty Company reported the following information at the end of 2011 and 2012:  An analysis of Scotty's records indicated that there were no cash flow effects resulting from the changes in the two accounts presented above. How should Scotty report the changes in these accounts on a statement of cash flows?
A) Scotty should report $200,000 for the acquisition of land as an investing activity and $200,000 for the issuance of stock as a financing activity. 
B) Scotty should report $200,000 as a noncash investing and financing activity for the acquisition of land by issuing common stock. 
C) Scotty should report the issuance of common stock to acquire land in the financing activity section with a net cash flow effect of zero. 
D) Scotty should report the acquisition of land by issuing common stock in the investing activity section with a net cash flow effect of zero.

Scotty Company Reported the Following Information at the End of 2011