Blecher Co

question 74

Multiple Choice

Blecher Co. reported the following information at the end of 2015 and 2016: An analysis of Blecher's records indicated that there were no cash flow effects resulting from the changes in the two accounts presented above. How should Blecher report the changes in these accounts on a statement of cash flows?

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

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Definitions:

Cash Flows

The net amount of cash being transferred into and out of a business, considered essential for assessing its financial health.

Cost of Capital

The cost of capital is the rate of return that a company must earn on its investment projects to maintain its market value and attract funds.

Crossover Rate

The discount rate at which two projects have the same net present value (NPV), used in capital budgeting.

IRR

Internal Rate of Return, a financial metric used to assess the profitability of potential investments, measuring the discount rate at which the net present value of costs and benefits equal zero.