Question

The accountant for Consolidated Enterprises Inc. has just finished preparing a consolidated balance sheet, income statement, and statement of changes in retained earnings for 20X3. The accountant has asked for assistance in preparing a statement of cash flows for the consolidated entity. Consolidated Enterprises holds 80 percent of the stock of Separate Way Manufacturing. The following items are proposed for inclusion in the consolidated cash flow statement:

Decrease in accounts receivable	$	23,000
Increase in accounts payable		10,000
Increase in inventory		19,000
Increase in bonds payable		127,000
Equipment purchased		382,000
Common stock repurchased		35,000
Depreciation reported for current period		61,000
Gain recorded on sale of equipment		9,000
Book value of equipment sold		32,000
Goodwill impairment loss		3,000
Sales		890,000
Cost of goods sold		328,000
Dividends paid by parent		45,000
Dividends paid by subsidiary		30,000
Consolidated net income for the year		420,000
Income assigned to the noncontrolling interest		14,000

Required:

Prepare a statement of cash flows for Consolidated Enterprises Inc. using the indirect method of computing cash flows from operations. (Negative amounts and amounts to be deducted should be indicated with a minus sign.)

Answer 1

Consolidated enterprises inc & subsidiary
Consolidated statement of cash flows
Cash flows from operating activities				amount	amount
Consolidated net income				420000
adjustments for non cash items
depreciation reported for current year				61000
gain recorded on sale of equipment				-9000
Goodwill impairment loss				3000
Changes in operating assets & laibilities
Decrease in accounts receivables				23000
increase in accounts payables				10000
Increase in inventory				-19000
net cash flow from operating activities					489000
Cash flow from investing activities
Purchase of equipment				-382000
sale of equipment (32000+9000)				41000
net cash flow from investing activities					-341000
Cash flow from financing activities
increase in bonds payable				127000
repurchase of common stock				-35000
Payment of dividend by parent				-45000
Payment of dividend by subsidiary (30000*20%)				-6000
net cash flow from financing activities					41000
net cash					189000

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