Question

Gervinho Corp. financial statements for the years ended Dec 31, 2014 and Dec 31, 2013 are as follows :

Balance Sheet : Dec 31, 2014 | Dec 31, 2013 | Increase
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Cash : 120,200 | 70,000 | 50,200
Accounts receivable (net) : 120,100 | 90,000 | 30,100
Inventories : 160,100 | 140,000 | 20,100
Property and Equipment, Cost : 190,400 | 150,000 | 40,400
Accumulated Depreciation : (46,000) |  (16,000)       | (30,000)
Goodwill : 67,000 | 12,000 | 55,000
Investments : 113,400 | 68,000 | 45,400
Total assets : 725,200 | 514,000 | 211,200
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Accounts payable : 160,400 | 146,000 | 14,400
Short term borrowings : 70,800 | 76,000 | (5,200)
Notes payable, Long-term : 60,000 | 4,000 | 56,000
Capital Surplus (no Par) : 342,000 | 258,000 | 84,000
Retained earnings : 92,000 | 30,000 | 62,000
Total Liabilities and Equity : 725,200 | 514,000 | 211,200
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No Property and Equipment was sold during 2014. Gervinho Corp. had acquired 100% of Dos Corp. for cash on Dec 26, 2014. Gervinho Corp. acquired no other company during 2014. No goodwill was written off or impairment charges taken in 2014.
Dos Corp. Balance Sheet on Dec 26, 2014 is as follows:
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Cash : 10,000
Accounts receivable (net) : 22,000
Inventories : 34,000
Property and Equipment (Net) : 24,000
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Accounts payable : 16,000
Stockholders' Equity : 74,000
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What will be the Cash Flow from Investing for Gervinho Corp. in 2014?
[Enter only numbers and minus sign if needed; no commas or $ signs or brackets () should be entered.]

Answer 1

Investment Cashflows

From the given balance sheet, the following are the investment Cashflows

1. Purchase of property, plant and equipment worth 40,400 (current year increase)

2. Investment in subsidiary by acquisition. The purchase Consideration is 100,400 (55,000 + 45,400)

Given there is no Goodwill amortization or impairment, so the entire change in goodwill is taken as due to acquisition.

Investment account will be debited with fair value of the subsidiary companies assets minus liabilities and the remaining excess cash consideration is debited to Goodwill.

So,

Total Cashflow from investing activity is "-140,800" (-100,400 - 40,400)

Note :

Taken the given financial statement of Gervincho corp as separate financial statement