Pound Co.reported the following information at the end of 2017 and 2018: $\begin{array}{lrr}&2017&2018\
\text { Land } & \$ 35,000 & \$ 100,000 \
\text { Common stock } & 200,000 & 265,000
\end{array}$An analysis of Pound's records indicated that there were no cash flow effects resulting from the changes in the two accounts presented above.How should Pound report the changes in these accounts on a statement of cash flows?

A)Pound should report $65,000 for the acquisition of land as an investing activity and $65,000 for the issuance of stock as a financing activity.
B)Pound should report $65,000 as a noncash investing and financing activity for the acquisition of land by issuing common stock.
C)Pound should report the issuance of common stock to acquire land in the Financing Activities section with a net cash flow effect of zero.
D)Pound should report the acquisition of land by issuing common stock in the Investing Activities section with a net cash flow effect of zero.

Question

Pound Co.reported the following information at the end of 2017 and 2018: $\begin{array}{lrr}&2017&2018\
\text { Land } & \$ 35,000 & \$ 100,000 \
\text { Common stock } & 200,000 & 265,000
\end{array}$An analysis of Pound's records indicated that there were no cash flow effects resulting from the changes in the two accounts presented above.How should Pound report the changes in these accounts on a statement of cash flows?

A)Pound should report $65,000 for the acquisition of land as an investing activity and $65,000 for the issuance of stock as a financing activity.
B)Pound should report $65,000 as a noncash investing and financing activity for the acquisition of land by issuing common stock.
C)Pound should report the issuance of common stock to acquire land in the Financing Activities section with a net cash flow effect of zero.
D)Pound should report the acquisition of land by issuing common stock in the Investing Activities section with a net cash flow effect of zero.

Quizplus · Accepted Answer

The increase in land value by $65,000 and the corresponding increase in common stock by $65,000, without any cash flow effects, indicates that the land was acquired through the issuance of stock. This is a noncash transaction and should be reported as a noncash investing and financing activity.

Pound Coreported the Following Information at the End of 2017 and and 2018