A Company Purchases Land Using Its Common Stock

question 60

Multiple Choice

A company purchases land using its common stock. If the company prepares the statement of cash flows using the indirect method or the direct method, where would this transaction appear?

• A)The purchase of land would be presented in the financing activities section as a cash payment under both methods.
• B)The purchase of land would be presented in the investing activities section as a cash payment under both methods.
• C)The purchase of land would be presented in the operating activities section as a reduction in net income under the indirect method and as a cash payment under the direct method.
• D)The purchase of land would be presented in the non-cash investing and financing activities section under both methods.

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Definitions:

Coercive Power

Power that is derived from the ability to punish or penalize others, often used as a means to achieve compliance or control.

Reward Power

The capacity to influence others by providing or withholding desired outcomes.

Information Power

A form of power that comes from access to, control over, and distribution of information.

Legitimate Power

The authority that a person possesses as a result of their position in an organization's hierarchy.