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Tracy Company reported the following information at the end of Year 1 and Year 2:
| Year 1 | Year 2 | |
| Land | $ 35,000 | $ 90,000 |
| Common Stock | 200,000 | 255,000 |
An analysis of the company’s records indicated that there were no cash flow effects resulting from the changes in the two accounts presented above. How should Tracy report the changes in these accounts on a statement of cash flows?
a.The company should report $55,000 for the acquisition of land as an investing activity and $55,000 for the issuance of stock as a financing activity.
b.The company should report the issuance of common stock to acquire land in the financing activity section with a net cash flow effect of zero.
c.The company should report $55,000 as a noncash investing and financing activity for the acquisition of land by issuing common stock.
d.The company should report the acquisition of land by issuing common stock in the investing activity section with a net cash flow effect of zero.
Expert Answer
Solution: The company should report $55,000 as a noncash investing and financing activity for the acquisition of land by issuing common stock.
Explanation: As the cash effect has been nullified, thus in order to correct it, $55000 has to be reported as a noncash investing and financing activity for the acquisition of land by issuing common stock
