Question

In: Accounting

A Corp. owns 80% of B Corp. The Consolidated Financial Statements of A Corp. for 2018...

A Corp. owns 80% of B Corp. The Consolidated Financial Statements of A Corp. for 2018 and 2019 are shown below:

A Corp.

Consolidated Balance Sheet, December 31, 2019

2019

2018

Cash

$180,000

$40,000

Accounts Receivable

$300,000

$100,000

Inventory

$400,000

$100,000

Land

$160,000

$200,000

Plant and Equipment

$1,650,000

$1,170,000

Accumulated Depreciation

($800,000)

($770,000)

Goodwill

$60,000

$60,000

Total Assets

$1,950,000

$900,000

Accounts Payable

$326,000

$40,000

Accrued Liabilities

$350,000

$140,000

Bonds Payable

$400,000

$100,000

Less Bond Discount

($40,000)

($50,000)

Non-Controlling Interest

$214,000

$200,000

Common Shares

$350,000

$350,000

Retained Earnings

$350,000

$120,000

Total Liabilities and Equity

$1,950,000

$900,000

A Corp.

Consolidated Income Statement, For the year ended December 31, 2019

Sales

$500,000

Cost of aales

$115,000

Depreciation

$30,000

Interest expense

$50,000

Gain on land sale

($10,000)

($185,000)

Net income

$315,000

Attributable to:

Shareholders of Parent

$300,000

Non-Controlling Interest

$15,000

Other Information:

A purchased its interest in B on January 1, 2015 for $360,000 when the company's net assets were valued at $300,000. The acquisition differential was allocated equally between goodwill and equipment, which was estimated to have a remaining useful life of ten years from the acquisition date.

B reported a net income of $75,000 and paid dividends of $5,000 during 2019.

A issued $300,000 in bonds during the year. A reported an equity method net Income of $300,000 and paid $70,000 in dividends to its shareholders.

Required:

Prepare a Consolidated Statement of Cash Flows for A Corp. for 2019.

Solutions

Expert Solution

Cash flow from Operating Activities Amount
Net Profit As per Income Statement    3,15,000.00
Depreciation        30,000.00
Net Profit Before Working Capital Changes    3,45,000.00
Changes In Working Capital
- Increase In Accounts Payable    2,86,000.00
- Increase In Accrued Liability    2,10,000.00
- Increase in accounts receivable -2,00,000.00
- Increase in inventory -3,00,000.00
Cash From Operating Activity (A)    3,41,000.00
Cash flow from Investing Activities
- Puchase of Plant & Equipment -4,80,000.00
- Dividend Received (Note 1)          4,000.00
- Sale of Land (Note 2)        50,000.00
Cash From Investing Activity (B) -4,26,000.00
Cash flow from Financial Activities
- Bonds Issued    3,00,000.00
- Dividend Paid      -75,000.00
Cash From Financial Activity (C)    2,25,000.00
Opening Cash Balance        40,000.00
Changes (A+B+C)    1,40,000.00
Closing Cash Balance    1,80,000.00
Note 1 : Dividend Received
Dividend Paid by B          5,000.00
Share in B 80%
Dividend Received by A          4,000.00
Note 2 : Sale of Land
Decrease in Value of Land        40,000.00
Gain on sale of land        10,000.00
Sale Value        50,000.00

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