While Preparing a Statement of Cash Flows, You Encountered the Following

question 28

Essay

While preparing a statement of cash flows, you encountered the following transaction:
February 1, 2017: Battles Corporation acquired a small office building in exchange for 50,000 shares of its own common stock; par value $10 per share; market value $15 per share.
Required:
Should this transaction be shown on the statement of cash flows? Why or why not?

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Definitions:

Long-Run

The long-run refers to a period in economics where all factors of production and costs are variable, allowing all inputs to be adjusted.

Short-Run

A period in economics during which at least one factor of production is fixed, focusing on immediate effects and adjustments.

Spreading Effect

A phenomenon in economics where an initial investment leads to additional benefits that spread beyond the immediate context, often stimulating further economic activity.

Fixed Cost

Expenses that remain constant regardless of the firm's production volume.