A Company Purchases Land Using Its Ordinary Shares

question 71

Multiple Choice

A company purchases land using its ordinary shares.Where would this transaction appear when the company prepares the cash flow statement?

• A)The purchase of land would be presented in the financing activities section as a cash payment.
• 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 profit.
• D)The purchase of land would be presented in the non-cash investing and financing activities section.

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Definitions:

Fixed Factor

An input in the production of goods and services that cannot be easily increased or decreased in the short run.

Marginal-cost Schedule

A table or graph showing how the cost of producing one more unit of a good or service varies as the production level changes.

Fixed Costs

Overheads that are unaffected by changes in production or sales quantities, encompassing rent, employee salaries, and insurance payments.

Average Total Cost Curves

Average Total Cost Curves represent the total cost per unit of output, calculated by dividing the total cost by the quantity of output produced.