Question

Bolero Company holds 80 percent of the common stock of Rivera, Inc., and 30 percent of this subsidiary’s convertible bonds. The following consolidated financial statements are for 2017 and 2018:

	2017				2018
Revenues	$	(875,000	)		$	(1,005,000	)
Cost of goods sold		605,000				645,000
Depreciation and amortization		95,000				110,000
Gain on sale of building		0				(25,000	)
Interest expense		35,000				35,000
Consolidated net income		(140,000	)			(240,000	)
to noncontrolling interest		14,000				16,000
to parent company	$	(126,000	)		$	(224,000	)
Retained earnings, 1/1	$	(305,000	)		$	(376,000	)
Net income		(126,000	)			(224,000	)
Dividends declared		55,000				105,000
Retained earnings, 12/31	$	(376,000	)		$	(495,000	)
Cash	$	85,000			$	160,000
Accounts receivable		160,000				145,000
Inventory		205,000				350,000
Buildings and equipment (net)		645,000				705,000
Databases		160,000				150,000
Total assets	$	1,255,000			$	1,510,000
Accounts payable	$	(145,000	)		$	(110,000	)
Bonds payable		(405,000	)			(510,000	)
Noncontrolling interest in Rivera		(37,000	)			(46,000	)
Common stock		(110,000	)			(135,000	)
Additional paid-in capital		(182,000	)			(214,000	)
Retained earnings		(376,000	)			(495,000	)
Total liabilities and equities	$	(1,255,000	)		$	(1,510,000	)

Additional Information for 2018

The parent issued bonds during the year for cash.

Amortization of databases amounts to $10,000 per year.

The parent sold a building with a cost of $70,000 but a $35,000 book value for cash on May 11.

The subsidiary purchased equipment on July 23 for $195,000 in cash.

Late in November, the parent issued stock for cash.

During the year, the subsidiary paid dividends of $35,000. Both parent and subsidiary pay dividends in the same year as declared.

Prepare a consolidated statement of cash flows for this business combination for the year ending December 31, 2018. (Use indirect method) (Negative amounts and amounts to be deducted should be indicated by a minus sign.)

Answer 1

Consolidated statement of cash flow
For the year ended December 31, 2018
		Amount($)	Amount($)
A.	Cash flow from operating activities:
	Net income	224,000
	Additions to cash:
	Depreciation and amortization	110,000
	Interest expense	35,000
	Decrease in accounts receivable	15,000
	Subtractions from cash:
	Gain on sale of building	-25,000
	Increase in inventory	-145,000
	Decrease in accounts payable	-35,000	179,000
B.	Cash flow from investing activities:
	Proceeds from sale of building (35,000+25,000)	60,000
	Purchase of equipment	-195,000	-135,000
C.	Cash flow from financing activities:
	Interest paid	-35,000
	Dividend paid	-105,000
	Contribution received from minority (46,000-37,000)	9,000
	Capital contributions received	32,000
	Proceeds from bonds issued	105,000
	Proceeds from stock issued	25,000	31,000
D.	Net cash generation (A+B+C)		75,000
E.	Beginning cash balance		85,000
F.	Ending cash balance (D+F)		160,000