What are noncash investing and financing activities?

3. What are noncash investing and financing activities? Provide an example. How are such transactions shown on the statement of cash flows?


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Sandy White is a realtor

P1-39B Corporate attributes, applying the entity concept, and preparing financial statements

Sandy White is a realtor. She organized her business as a corporation, Sandy White, Realtor, P.C. (Professional Corporation), by investing $27,000 cash. The business issued common stock to her. Consider the following facts at May 31, 2012:

a. The business owes $62,000 on a note payable for land that the business acquired for a total price of $80,000.
b. The business spent $26,000 for a Minko Banker real estate franchise, which entitles the business to represent itself as a Minko Banker office. This franchise is a business asset.
c. White owes $70,000 on a personal mortgage for her personal residence, which she acquired in 2012 for a total price of $130,000.
d. White has $4,000 in her personal bank account, and the business has $13,000 in its bank account.
e. White owes $3,000 on a personal charge account with Chico’s.
f. The office acquired business furniture for $20,000 on May 25. Of this amount, the business owes $5,000 on account at May 31.
g. Office supplies on hand at the real estate office total $1,100.

Requirements
1. White was concerned about liability exposure. Which corporate feature limits White’s personal liability?
2. Prepare the balance sheet of the real estate business of Sandy White, Realtor, P.C., at May 31, 2012.
3. Identify the personal items that would not be reported on the business records.

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Henri and Simone started Manx Corporation in 2002 with each investing $500,000

Henri and Simone started Manx Corporation in 2002 with each investing $500,000. Manx develops and manufactures pet toys and supplies. The business has been very profitable (now valued at $5 million) due to Henri’s marketing abilities and Simone’s knack for inventing toys that pets love. Since Henri and Simone feel that Manx cannot expand further in the pet product industry, they are in the market to acquire another company. Henri hears about LaPerm Corporation from one of their customers. LaPerm is a beauty supply manufacturer. It has a great line of products but has suffered substantial losses due to a lack of strategic marketing and ineffective management. It is a small company with net assets valued at $200,000, but it has a $300,000 NOL and a $100,000 business credit carryover. All the shares of LaPerm are held by Marcel, who started LaPerm 40 years ago. Marcel is 66 and is no longer interested in running the business. Before Henri and Simone enter into negotiations with Marcel regarding the acquisition of LaPerm using a tax-deferred reorganization, what issues should be considered?

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