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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

A corporation issued $2,000,000 of common stock in exchange for $2,000,000 of fixed assets. Where would this transaction be reported on the statement of cash flows?

To determine

Statement of cash flows: It is one of the financial statement that shows the cash and cash equivalents of a company for a particular period. It determines the net changes in cash through reporting the sources and uses of cash due to the operating, investing, and financing activities of a company.

Non-Cash Transaction:

The transaction, which does not involve any cash dealings, is known as non-cash transactions. In these type transactions there will not be any inflow or outflow of cash. Simply put, the transaction, which does not have an impact on the inflow or outflow of cash, is called as non-cash transactions.

Examples of significant non-cash transactions are stated below:

  • Issue of common stock to retire long-term debt.
  • Purchase of machinery by issuing notes payable.
  • Issuance of common stock for purchase of land.

To Indicate: The reporting of transaction “Issued $2,000,000 of common stock in exchange for $2,000,000 of fixed asset” on the statement of cash flows.

Explanation

The transaction of ‘Issued of common stock in exchange of fixed asset’ is a non-cash transaction and it has no effect on the flow of cash during the period...

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