Question

Pecan Corporation’s controller has just finished preparing a consolidated balance sheet, income statement, and statement of changes in retained earnings for the year ended December 31, 20X4. Pecan owns 60 percent of Sandy Corporation’s stock, which it acquired at underlying book value on May 7, 20X1. At that date, the fair value of the noncontrolling interest was equal to 40 percent of Sandy Corporation’s book value. You have been provided the following information:

1. Consolidated net income for 20X4 was $271,000.
2. Sandy reported net income of $70,000 for 20X4.
3. Pecan paid dividends of $25,000 in 20X4.
4. Sandy paid dividends of $15,000 in 20X4.
5. Pecan issued common stock on April 7, 20X4, for a total of $150,000.
6. Consolidated wages payable increased by $7,000 in 20X4.
7. Consolidated depreciation expense for the year was $21,000.
8. Consolidated accounts receivable decreased by $32,000 in 20X4.
9. Bonds payable of Pecan with a book value of $204,000 were retired for $200,000 on December 31, 20X4.
10. Consolidated amortization expense on patents was $13,000 for 20X4.
11. Pecan sold land that it had purchased for $142,000 to a nonaffiliate for $134,000 on June 10, 20X4.
12. Consolidated accounts payable decreased by $12,000 during 20X4.
13. Total purchases of equipment by Pecan and Sandy during 20X4 were $295,000.
14. Consolidated inventory increased by $16,000 during 20X4.

There were no intercompany transfers between Pecan and Sandy in 20X4 or prior years except for Sandy’s payment of dividends. Pecan uses the indirect method in preparing its cash flow statement.

Pecan uses the indirect method in preparing its cash flow statement.

Required:
a. What amount of dividends was paid to the noncontrolling interest during 20X4?
b. What amount will be reported as net cash provided by operating activities for 20X4?
c. What amount will be reported as net cash used in investing activities for 20X4?
d. What amount will be reported as net cash used in financing activities for 20X4?
e. What was the change in cash balance for the consolidated entity for 20X4?
  

Answer 1

Answer Page No ③ @ den- Controlling interest received dividends Non-controlling opterest preceived dividends - $ 15000 X40%. = $6000 ' Non-controlling interest received dividends = $6000 SAAN Amount ooill be reporte del cane me te cash provided by competing activities ! Particular Amount Consolidated news income $271000 Depreciation expense $ 21000 Amortization of patents $73000 Gain on bond retirement (14000) Loss on sale of land $ 8000 Decrease in coccounts receivables $32000 Increase is inventory 16000) Decrease in accounts payable ($12000) Increase in coages payable $ 7000 Tobal $ 320,000

Gain on bond Page No @ sebérement = 204000 - 200,000 = $4000 Loss on sale of land = $142000 – $134000 8000 "Het cash provided by operating activities = $320000 het caste seated by Bevesting activities Purchases of equipment = $295000 Sale of land - $ 134000 Total =-995000 + 134000 = ($16.000) Het cash used in investing activities = ($161000)

Page No ③ | cash used financing activities Sale of stock = $ 150,000 Bond retirement = $200,000 Dividends paid to Pecon Corporation shareholders = $ 25000 Dividends paid to non controlling interests = $6000 Total = 150,000 - 200,000 - 25000 - 6000 = ($81000) .'. cash used on financéng activities will be reported asfB1000) @ Tebal cash balance changed for consolidated embily for sexy Cash balance = 320,000 -- 161000 - 81000 = $48000 ... change in cash balance for consolidated entily for 20x4 = 4 +8000 Cincreases