Question

2. Loki Corporation acquired 80 percent ownership of Goose Company on January 1, 20X6, at underlying book value. At that date, the fair value of the noncontrolling interest was equal to 20 percent of the book value of Goose Company. Consolidated balance sheets at January 1, 20X8, and December 31, 20X8, are as follows:

Item	Jan 1, 20X8					Dec 31, 20X8
Cash		$	50,000					$	80,000
Accounts Receivable			75,000						90,000
Inventory			85,000						100,000
Land			60,000						80,000
Buildings and Equipment			300,000						350,000
Less: Accumulated Depreciation			(90,000	)					(120,000	)
Patents			12,000						10,000
Total Assets		$	492,000					$	590,000
Accounts Payable		$	40,000					$	58,000
Wages Payable			20,000						16,000
Notes Payable			150,000						175,000
Common Stock ($5 par value)			100,000						100,000
Retained Earnings			162,000						218,000
Noncontrolling Interest			20,000						23,000
Total Liabilities and Equities		$	492,000					$	590,000

The consolidated income statement for 20X8 contained the following amounts:

Sales				$	400,000
Cost of Goods Sold	$	172,000
Wage Expense		45,000
Depreciation Expense		30,000
Interest Expense		12,000
Amortization Expense		2,000
Other Expenses		52,000			(313,000	)
Consolidated Net Income				$	87,000
Income to Noncontrolling Interest					(6,000	)
Income to Controlling Interest				$	81,000

Loki and Goose paid dividends of $25,000 and $15,000, respectively, in 20X8.

Required:

1) Prepare a worksheet to develop a consolidated statement of cash flows for 20X8 using the indirect method of computing cash flows from operations. (8 points)

2) Prepare a consolidated statement of cash flows for 20X8. (12 points)

Answer 1

Part 1)

The worksheet is given as below:

Loki Corporation and Goose Company
Consolidated Cash Flow Work Paper
Year Ended December 31, 2018
	Balance			Balance
Item	01-01-2008	Debit	Credit	12-31-2008
Cash	50,000	30,000 (a)		80,000
Accounts Receivable	75,000	15,000 (b)		90,000
Inventory	85,000	15,000 (c)		1,00,000
Land	60,000	20,000 (d)		80,000
Buildings and Equipment	300,000	50,000 (e)		3,50,000
Patents	12,000		2,000 (f)	10,000
	$582,000			$710,000
Accumulated Depreciation	90,000		30,000 (g)	120,000
Accounts Payable	40,000		18,000 (h)	58,000
Wages Payable	20,000	4,000 (i)		16,000
Notes Payable	150,000		25,000 (j)	175,000
Common Stock	100,000			100,000
Retained Earnings	162,000	25,000 (k)	81,000 (l)	218,000
Noncontrolling Interest	20,000	3,000 (m)	6,000 (I)	23,000
	$582,000	$162,000	$162,000	$710,000
Cash Flow from Operating Activities
Consolidated Net Income		87,000 (I)
Depreciation Expense		30,000 (g)
Amortization of Patent		2,000 (f)
Increase in Accounts Receivable			15,000 (b)
Increase in Inventory			15,000 (c)
Increase in Accounts Payable		18,000 (h)
Decrease in Wages Payable			4,000 (i)
Cash Flow from Investing Activities
Purchase of Land			20,000 (d)
Purchase of Buildings and Equipment			50,000 (e)
Cash Flow from Financing Activities
Increase in Notes Payable		25,000 (j)
Dividends Paid
To Loki Corporation Shareholders			25,000 (k)
To Goose Company Shareholders			3,000 (m)
Increase in Cash			30,000 (a)
		$162,000	$162,000

______

Part 2)

The consolidated consolidated statement of cash flows for 20X8 is prepared as follows:

Loki Corporation and Goose Company
Consolidated Statement of Cash Flows
Year Ended December 31, 2018
Cash Flow from Operating Activities
Consolidated Net Income	87,000
Noncash Expenses, Revenues, Losses and Gains Included in Income
Depreciation Expense	30,000
Amortization of Patent	2,000
Increase in Accounts Receivable	-15,000
Increase in Inventory	-15,000
Increase in Accounts Payable	18,000
Decrease in Wages Payable	-4,000
Net Cash Provided by Operating Activities (A)		$103,000
Cash Flow from Investing Activities
Purchase of Land	-20,000
Purchase of Buildings and Equipment	-50,000
Net Cash Used by Investing Activities (B)		-$70,000
Cash Flow from Financing Activities
Increase in Notes Payable	25,000
Dividends Paid to Loki Corporation Shareholders	-25,000
Dividends Paid to Noncontrolling Shareholders	-3,000
Net Cash Used by Financing Activities (C)		-$3,000
Increase in Cash (A+B+C)		$30,000
Opening Cash Balance		$50,000
Closing Cash Balance		$80,000