In a statement of cash flows, the cash flows from investing activities section should report
a.the issuance of common stock in exchange for a factory building.
b.stock dividends received.
c.a major repair to machinery charged to accumulated depreciation.
d.the assignment of accounts receivable
This question is for a corporation and the answer must be the best one for the investing section of the cash flow statement. Thank you.
b.stock dividends received.
the assignment of accounts receivable
The correct answer for the investing activities section of the statement of cash flows for a corporation is:
a. the issuance of common stock in exchange for a factory building.
The cash flows from investing activities section reports any cash flows related to the buying, selling, or acquiring of long-term assets, such as property, plant, and equipment (PP&E) or investments. Issuing common stock in exchange for a factory building would be considered a cash outflow from investing activities, as it involves the acquisition of a long-term asset.
Option b, stock dividends received, would be classified under financing activities because it involves distributing profits to shareholders and does not relate to the acquisition or disposal of assets.
Option c, a major repair to machinery charged to accumulated depreciation, would be considered a non-cash transaction and does not involve the movement of cash, so it would not be reported in the cash flow statement.
Option d, the assignment of accounts receivable, would be considered a cash inflow from operating activities, as it is related to the collection of assets resulting from the company's normal operations.
The cash flows from investing activities section of a statement of cash flows reports the cash inflows and outflows related to the company's investments in assets and securities. The correct answer for this question would be option a: "the issuance of common stock in exchange for a factory building."
To arrive at this answer, first, let's understand the nature of the options provided:
a. The issuance of common stock in exchange for a factory building: This transaction represents the acquisition of a long-term asset (factory building) through the issuance of equity (common stock). Investing activities section of the statement of cash flows reports the purchase or sale of long-term productive assets, such as property, plant, and equipment.
b. Stock dividends received: Stock dividends received do not fall under the category of investing activities; it falls under the operating activities section of the cash flow statement.
c. A major repair to machinery charged to accumulated depreciation: This transaction relates to expenses incurred for maintaining and repairing machinery, and it classified as an operating activity, not an investing activity.
d. The assignment of accounts receivable: The assignment of accounts receivable represents a financing activity, as it involves the transfer of receivables to a third party in exchange for cash, often through a factoring agreement.
Considering the provided options, the issuance of common stock in exchange for a factory building (option a) is the most appropriate answer for the investing activities section of the cash flow statement.