A company purchases land using its common stock. If the company prepares the statement of cash flows using the indirect method or the direct method, where would this transaction appear?
A)The purchase of land would be presented in the financing activities section as a cash payment under both methods.
B)The purchase of land would be presented in the investing activities section as a cash payment under both methods.
C)The purchase of land would be presented in the operating activities section as a reduction in net income under the indirect method and as a cash payment under the direct method.
D)The purchase of land would be presented in the non-cash investing and financing activities section under both methods.

Question

Quizplus · Accepted Answer

The purchase of land using common stock is a non-cash transaction and would be reported in the non-cash investing and financing activities section of the statement of cash flows, regardless of whether the indirect or direct method is used.

A Company Purchases Land Using Its Common Stock