Company P acquired 75% of the outstanding common stock of the Company S by issuing common stock with a market value of $650,000 on January 1, 20X3. The balance sheet of Company S was as follows on the acquisition date: The market values were as follows: Inventory, $180,000; Land, $150,000; Building, $600,000. What is the amount that will appear as Cash Provided (Used) by Financing Activities as a result of this purchase?

Question

Company P acquired 75% of the outstanding common stock of the Company S by issuing common stock with a market value of $650,000 on January 1, 20X3. The balance sheet of Company S was as follows on the acquisition date:  The market values were as follows: Inventory, $180,000; Land, $150,000; Building, $600,000. What is the amount that will appear as Cash Provided (Used) by Financing Activities as a result of this purchase?

Quizplus · Accepted Answer

Because the company was paid for with stock (a non-cash transaction not resulting in cash inflows from the sale of stock), no amount would be included in the financing activities in the consolidated statement of cash flows.

Company P Acquired 75% of the Outstanding Common Stock of the Company