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 on a schedule of significant noncash transactions if it is material.
C) Report $12,000 as an inflow of cash.
D) Should not be reported on the statement of cash flows.

Question

Quizplus · Accepted Answer

The transaction involves a noncash item (issuance of common shares) and it is material (represents a significant amount of $12,000). Therefore, it should be reported on a schedule of significant noncash transactions that accompanies the statement of cash flows.

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