A company purchases land using its common stock. If the company prepares the sta

Question

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? The purchase of land would be presented in the non - cash investing and financing activities section under both methods. The purchase of land would be presented in the investing activities section as a cash payment under both methods. 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. The purchase of land would be presented in the financing activities section as a cash payment under both methods.

Explanation / Answer

The correct option is A. The Purchase of land would be presented in the Non Cash investing and financing activities sections under both methods. The purchase of land is a non cash transaction hence, it would be recored as non cash transaction.

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