C is corrent. Per ASC Topic 230, investing and financing activities which do not affect cash but do affect recognized assets and liabilities should be presented in a separate schedule to accompany the statement of cash flows. Examples of such items include
| | 1. | Conversion of debt to
equity |
| | 2. | Acquisition of assets by either:| | | − | Incurring a mortgage | | − | Entering into a capital
lease | | − | Issuing stock | | |
|
| | 3. | Exchange of noncash assets or
liabilities for other noncash assets or liabilities. |
A is incorrect because the declaration of a cash dividend is not shown on the statement of cash flows. However, payment of the dividend liability will be presented as a cash outflow from financing activities.
B is incorrect because the proceeds from issuing common stock is shown as a cash inflow from financing activities.
D is incorrect because the purchase of treasury stock is presented as a cash outflow from financing activities.
