Company P acquired 80% of the outstanding common stock of the Company S by issuing common stock with a market value of $550,000. The balance sheet of Company S was as follows on the acquisition date: The market values were as follows: Inventory, $130,000; Land, $120,000; Building, $400,000. What is the amount that will appear as Cash Provided (Used) by Investing Activities on the consolidated statement of cash flows, as a result of this purchase?

Question

Company P acquired 80% of the outstanding common stock of the Company S by issuing common stock with a market value of $550,000. The balance sheet of Company S was as follows on the acquisition date:  The market values were as follows: Inventory, $130,000; Land, $120,000; Building, $400,000. What is the amount that will appear as Cash Provided (Used) by Investing Activities on the consolidated statement of cash flows, as a result of this purchase?

Quizplus · Accepted Answer

Because the company was paid for with stock (a non-cash transaction not requiring cash outflows), the amount included in the investing activities in the consolidated statement of cash flows would be the $50,000 cash purchased with the company.

Company P Acquired 80% of the Outstanding Common Stock of the Company