Q25E - Horngren'S Financial And Managerial Accounting

Question

Identifying and reporting non-cash transactions

Dirtbikes, Inc. identified the following selected transactions that occurred during the year ended December 31, 2018:

1. Issued 750 shares of \(3 par common stock for cash of \)17,000.
2. Issued 5,100 shares of \(3 par common stock for a building with a fair market value of \)96,000. 
3. Purchased new truck with a fair market value of \(29,000. Financed it 100% with a long-term note. 
4. Retired short-term notes of \)28,000 by issuing 1,900 shares of \(3 par common stock. 
5. Paid long-term note of \)10,500 to Bank of Tallahassee. Issued new long-term note of $23,000 to Bank of Trust. 

Identify any non-cash transactions that occurred during the year, and show how they would be reported in the non-cash investing and financing activities section of the statement of cash flows

Step-by-Step Solution

Answer

Total Non-cash Investing and Financing Activities is $153,000.

Step 1: Identification of non-cash transactions that occurred during the year

Following are the non-cash transactions:

b. Issued 5,100 shares of $3 par common stock for a building with a fair market value of $96,000. 

c. Purchased new truck with a fair market value of $29,000. Financed it 100% with a long-term note. 

d. Retired short-term notes of $28,000 by issuing 1,900 shares of $3 par common stock.

Step 2: Non-cash investing and financing activities

Dirtbikes Inc. Statement of cash flows (Partial) Year ended December 31, 2018
Non-cash investing and financing activities
Acquisition of building by issuing common stock	$96,000
Acquisition of truck by issuing notes payable	$29,000
Retirement of short-term notes by issuing common stock	$28,000
Total Non-cash Investing and Financing Activities	$153,000