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P Corporation acquired 80 percent ownership of S Company on January 1, 20X6, at underlying book...

P Corporation acquired 80 percent ownership of S Company on January 1, 20X6, at underlying book value. At that date, the fair value of the noncontrolling interest was equal to 20 percent of the book value of S Company. Consolidated balance sheets at January 1, 20X8, and December 31, 20X8, are as follows:

The consolidated income statement for 20X8 contained the following amounts:

P and S paid dividends of $25,000 and $15,000, respectively, in 20X8.

Required:

  1. Prepare a worksheet to develop a consolidated statement of cash flows for 20X8 using the indirect method of computing cash flows from operations.
  2. Prepare a consolidated statement of cash flows for 20X8.
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Answer #1

Cash flows prepared in two methods i.e direct method and indirect method.

The format of the indirect method appears in the following example. In the presentation format, cash flows are divided into the following

1).Cash flows from operating activities it state that cash inflows and outflows were received through operating activities like income/revenue and expenses for running of business .

2).Cash flows from investing activities it states that cash inflows and outflows arrived through investment activities like purchase of buildings/plan/ fixed assets and sales of fixed assets.

3).Cash flows from financing activities. it states that cash inflows and outflows received through financial activities likes issue Proceeds from issue of common stock and paid dividend and etc.

Cash flow statement is as follows

P Corporation
Cash flow statement Indirect for the year ended 2018
Particulars Amount Amount
Cash flows from Operating activies
Net Income 25000
Adjustment
Additions
Depreciation and Amortizaton 0
Provision for loss on account of Accounts receivable 0
Increase in Inventory 0
Total 0
Less
Increase in trade receivables 0
Dreased in trade Payable 0
Total 0
Cash Generated from Operations 0 25000
Cash flows from investing activities
Less:-Purchase of Fixed Assests 0
Add:-Proceeds from sale of Fixed Assets 0
Cash Generated from Investing Activties 0 0
Cash flows from Finacial Activities
Proceeds from issue of common stock 0
Proceeds from issuance of long-term debt 0
Dividends paid -25000
Cash Generated from Financial Activities -25000 -25000
Net cash Flows 0
Opening Cash Balance 0
Closing cash balance 0

We assumed that net profit is Rs.25000 in P Corporation.

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