Question

Deed Co. owns 2% of Beck Cosmetic Retailers. A property dividend by Beck consisted of merchandise with a fair value lower than the listed retail price. Deed in turn gave the merchandise to its employees as a holiday bonus. How should Deed report the receipt and distribution of the merchandise in its statement of cash flows?

Answer 1

Answer:

As a non-cash activity.

Explanation:

The Cash Flow Statement is a financial statement that has the purpose of reporting all transactions of the company in a period. One of the main purposes of the Cash Flow Statement is to detail the source of funds the company has, as well as the way they were used. Based on this, we can state that since Deed Co. has delivered the value of its goods received to its employees as a holiday bonus, this transaction cannot come in as a monetary activity because it does not report a movement of the company, so the transaction should be reported as a non-monetary activity.