Question

Riley Company paid $60,000 cash to purchase land from Smally Company. Smally originally paid $60,000 for the land. A) Was this even an asset source, use, or exchange transaction for Riley Company? B) What about for Smally Company?C) Was the cash flow an operating, investing, or financing activity on Riley Company's 2018 statement of cash flows?D) What about for Smally Company?

Answer 1

Answer:

A. Asset exchange transaction

B. Asset exchange transaction

C. Investing activity

D. Investing activity.

Explanation:

In the question, the Riley company paid cash to Smally company, and the Smally company paid the amount for the land.

So,  

A. For Riley company, it is an asset exchange transaction as the asset exchanges between Riley and Smally company.  

B.  For Smally company it is an asset exchange transaction as the asset are the exchange between Riley and Smally company.

C. Investing activity. As the Riley company deals in the purchase and the sale of the fixed assets.

D. Investing activity. As the company deals in the purchase and the sale of the fixed assets.