During the year, Ollie's Outdoor Outfitters issued 20,000 shares of common stock in exchange for a prime piece of land. Two employees of the accounting department, Audrey and Neil, disagree as to the appearance of this particular transaction on the
statement of cash flows. Audrey believes it to be a significant noncash transaction, and it therefore should be presented as such at the bottom of the statement. Neil contends that because this transaction did not cause any cash to flow in or out of the company, it has no place on the statement of cash flows. Who is correct and why?
Audrey is correct in her contention that the issuance of stock in exchange for land represents a significant noncash transaction and therefore should be disclosed in a separate schedule as part of the statement of cash flows. Usually, a transaction involving either part of this event would affect cash and would be included in the body of the cash flow statement. Because the movement of such items significantly affects the makeup of the balance sheet and income statement, adequate disclosure is necessary.
Neil's comment that cash is not affected by this transaction is true, but because the composition of the other statements is significantly affected, this transaction should be included in the statement of cash flows. Also, the statement of cash flows attempts to link the income statement and balance sheet items and should report all significant transactions that affect the two statements.
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Olivia, the owner of The Town Gazette, a small city newspaper, started her business two years ago, believing that there was still enough demand for her product. However, because people are busy and because so much news is now available online, she has seen the demand for her paper drop steadily. Olivia made a decision to change the original direction of the company and focus more on an Internet news service. Olivia is relying on _______ by demonstrating that managers need to think and act as if their company is an unfinished prototype, and by seeing her business as outsiders do.
A. a decision tree B. a knowledge dilemma C. the knee-jerk reaction theory D. evidence-based decision making E. intuition
Evaluate the alternatives available to Scope.
What will be an ideal response?
When preparing the industry analysis section of the business plan, using secondary sources is not appropriate.
Answer the following statement true (T) or false (F)
Endicott Enterprises Inc. has issued 30-year semiannual coupon bonds with a face value of $1,000. If the annual coupon rate is 14% and the current yield to maturity is 15%, what is the firm's current price per bond?
A) $934.20 B) $1,000.00 C) $934.34 D) $466.79