Question

On a statement of cash flows, the purchase of machinery in exchange for common stock is:__________.
a. not reported since there is no cash involved.
b. shown in the investing activities section.
c. shown in the financing activities section.
d. shown on a supporting schedule of noncash investing and financing activities.
e. Both b and c.

Answer 1

Answer:

d. shown on a supporting schedule of non-cash investing and financing activities.

Explanation:

This is a non-cash investing and financing activities.

The transaction does not involve any movement of cash, thus not included in the cash flow statement.

However a note must be published to explain the cause in changes in the amounts of assets ( machinery) and common stock.