Question

Belle Co. issued 1,000 shares of privately held common stock, $1 par and paid cash of $50,000 to purchase land with a fair value of $200,000. The fair value of the common stock is not readily determinable. What is the impact on the statement of cash flows including any required disclosures?

Select one:

a. Investing cash outflow of $200,000; Financing cash inflow of $150,000; Noncash disclosure of a $200,000 exchange of common stock for land.

b. Investing cash outflow of $200,000; Financing cash inflow of $150,000; Noncash disclosure of a $150,000 exchange of common stock for land.

c. Noncash disclosure of a $150,000 exchange of common stock for land.

d. Investing cash outflow of $50,000; Noncash disclosure of a $150,000 exchange of common stock for land.

Answer 1

The Answer is D) Investing cash outflow of $50,000; Non cash disclosure of a $150,000 exchange of common stock for land.

Explanation:

1) Under Cash flow statement, Only cash flows are recorded which means cash inflow and cash outflow.

2) In this transaction, only $ 50,000 is cash outflow for purchase of land which comes under investing activity.

3) Non cash disclosure of a $150,000[$200,000 - $50,000] exchange of common stock for land because there is no cash flow for $ 150,000.

4) Remaining options are Incorrect.