Northbrook Corporation is preparing a statement of cash flows.The following transactions occurred during the year:
1)Sold machinery for $9,000 cash.
2)Purchased a building for $80,000 cash.
3)Issued $70,000 worth of stock to acquire an airplane.
4)Converted long-term bonds by issuing $100,000 worth of stock.
5)Declared and paid a $10,000 cash dividend.
-Transaction 4 would be found on the statement of cash flows in the
A)cash flows from investing activities section.
B)cash flows from operating activities section.
C)cash flows from financing activities section.
D)noncash investing and financing transactions section.

Question

Northbrook Corporation is preparing a statement of cash flows.The following transactions occurred during the year: 
1)Sold machinery for $9,000 cash.
2)Purchased a building for $80,000 cash.
3)Issued $70,000 worth of stock to acquire an airplane.
4)Converted long-term bonds by issuing $100,000 worth of stock.
5)Declared and paid a $10,000 cash dividend.
-Transaction 4 would be found on the statement of cash flows in the
A)cash flows from investing activities section.
B)cash flows from operating activities section.
C)cash flows from financing activities section.
D)noncash investing and financing transactions section.

Quizplus · Accepted Answer

Transaction 4 involves converting long-term bonds into stock, which is a noncash transaction that affects financing activities. It does not involve the inflow or outflow of cash, so it is reported in the noncash investing and financing transactions section of the statement of cash flows.

Northbrook Corporation Is Preparing a Statement of Cash Flows