Use the Following Information for Questions 85 Through 87 Land Was Acquired for $200,000 in Exchange for Common Stock

question 33

Multiple Choice

Use the following information for questions 85 through 87.
The balance sheet data of Kohler Company at the end of 2015 and 2014 follow: $\begin{array}{lcc}&2015&2014\\\text { Cash } & \$ 100,000 & \$ 140,000 \\\text { Accounts receivable (net) } & 240,000 & 180,000 \\\text { Inventory } & 280,000 & 180,000 \\\text { Prepaid expenses } & 40,000 & 100,000 \\\text { Buildings and equipment } & 360,000 & 300,000 \\\text { Accumulated depreciation\_buildings and equipment } & (72,000) & (32,000) \\\text { Land } & 360,000 & 160,000\\\text { Totals }&\$1,308,000&\$1,028,000\\\text { Accounts payable } & \$ 272,000 & \$ 220,000 \\\text { Accrued expenses } & 48,000 & 72,000\\\text { Notes payable-bank, long-term }&&160,000\\\text { Mortgage payable }&120,000\\\text { Common stock, } \$ 10 \text { par } & 836,000 & 636,000 \\\text { Retained earnings (deficit) } & 32,000 & (60,000) \\&\$1,308,000&\$1,028,000\end{array}$ Land was acquired for $200,000 in exchange for common stock, par $200,000, during the year; all equipment purchased was for cash. Equipment costing $20,000 was sold for $8,000; book value of the equipment was $16,000 and the loss was reported as an ordinary item in net income. Cash dividends of $40,000 were charged to retained earnings and paid during the year; the transfer of net income to retained earnings was the only other entry in the Retained Earnings account. In the statement of cash flows for the year ended December 31, 2015, for Naley Company:
-The net cash provided (used) by financing activities was

• A) $ -0-.
• B) $(40,000).
• C) $(80,000).
• D) $120,000.

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Definitions:

Transfer Price Approach

A method used for pricing transactions between affiliated companies or divisions within the same larger corporate entity.

Standard Cost Approach

A costing method that assigns a fixed cost to inventory and cost of goods sold, based on standard estimates of input costs.

Market Price Approach

An approach to transfer pricing that uses the price at which the product or service transferred could be sold to outside buyers as the transfer price.

Decentralization

The distribution of decision-making power and assignment of management and operational duties away from a central authoritative location or group.