Asked by Hannah Charlton on Jul 04, 2024
Verified
Significant noncash transactions would not include
A) conversion of preferred shares into common shares.
B) asset acquisition through issue of a note payable.
C) loans to other companies.
D) exchange of equipment.
Significant Noncash
Transactions or activities that have a major impact on a company's financial position but do not involve a direct exchange of cash.
Preferred Shares
A class of stock that provides owners with a fixed dividend ahead of the company's common shares and with priority over common shares in asset liquidation.
Note Payable
A formal, written agreement to pay a certain amount of money, typically including interest, to the lender at a future date or on demand.
- Study the effects of specific financial activities on the statement of cash flows.
- Identify activities related to investing and financing that do not involve cash transactions and understand how to report them.
Verified Answer
CH
Christopher HawkinsJul 09, 2024
Final Answer :
C
Explanation :
Significant noncash transactions typically involve transactions that do not directly involve cash flows but significantly affect the financial position of a company. Examples include the conversion of preferred shares into common shares (A), asset acquisition through the issuance of a note payable (B), and the exchange of equipment (D). These are all examples of significant noncash investing and financing activities that are disclosed in financial statements. However, loans to other companies (C) involve a cash outflow from the lender and a cash inflow to the borrower, making it a cash transaction rather than a noncash transaction.
Learning Objectives
- Study the effects of specific financial activities on the statement of cash flows.
- Identify activities related to investing and financing that do not involve cash transactions and understand how to report them.