Question
During 2026 Fallowmere Logistics expanded without spending any cash on the expansion itself:
- On June 1 it acquired land by issuing 10,000 ordinary shares with a nominal value of $1 each. The land's fair value — and the shares' — was $250,000.
- On September 1 it acquired delivery equipment for $80,000 by signing a 3-year note payable to the dealer.
Required:
- Journal Entries — both acquisitions. Use Land, Share Capital, Share Premium, Equipment and Notes Payable.
- Cash Flow Reporting — how the two transactions appear in the 2026 statement of cash flows.
- Statement Impact — the combined effect of both transactions.
Statements in this challenge
- Journal EntriesJournal Entry
- Cash Flow ReportingMCQ Quiz
- Statement ImpactStatement Impact
Scoring
- 40% Account naming / line matching
- 40% Amount correctness
- 20% Structure / section placement
IAS 7.43 — non-cash investing and financing transactions
Transactions that change assets and liabilities without moving cash are excluded from the statement of cash flows itself and disclosed separately. The test is simply whether cash moved — if it did not, the item cannot appear in any of the three activity sections.
Common mistakes
- Showing an asset acquired directly under a loan or lease as both an investing outflow and a financing inflow.
- Including a share-for-share exchange or a conversion of debt to equity in financing activities.
- Omitting the required separate disclosure altogether once the item has been excluded.
Further readingIAS 7: the three activity sections