Question

The following comparative consolidated trial balances apply to Parent Company and its Subsidiary Company (80% control): Cash Trading securities portfolio (at market) Accounts receivable Inventories Land Property, plant and equipment Accumulated depreciation Goodwill Current liabilities Long-term notes payable NCI Paid-in Capital Retained Earnings Treasury Stock 12/31/17 $ 275,000 160,000 350,000 316,000 95,000 500,000 (135,000) 60,000 (190,000) (450,000) (161,000) (660,000) (195,000) 35,000 $ --- 12/31/18 $ 300,800 120,000 379,600 268,000 180,000 520,000 (152,000) 60,000 (154,500) (390,000) (188,780) (670,000) (288,120) 15,000 $ --- The following is additional information for 2018: No trading securities were sold nor were any investments added to the portfolio. Land was acquired by issuing a $40,000 note and giving cash for the balance. c) Equipment (cost $50,000; accumulated depreciation $40,000) was sold for $3,000 d) Dividends declared and paid: Parent 50,000; Sub $40,000. Consolidated net income amounted to $178,900. Required: Prepare the consolidated statement of cash flows for the year ended December 31, 2018.

Answer 1

Prepare the consolidated cash flow statement as follows

P Inc
Consolidated Cash Flow Statement
For the Year Ended December 31, 2018
Cash flows from operating activities:	Amount	Amount
Consolidated net income		$178,900
Adjustment to reconcile net income to net cash
Add: Depreciation expense ($152,000 − ($135000 − $40,000))	$57,000
Add: Unrealized trading loss ($120,000 − $160,0000)	$40,000
Add: Loss on sale of equipment (($50,000 − $40,000) − $3,000)	$7,000
Add: Decrease in inventory ($316,000 − $268,000)	$48,000
Deduct: Increase in accounts receivable ($350,000 − $379,600)	($29,600)
Deduct: Decrease in current liabilities ($154,500 − $190,000)	($35,500)
Total adjustments		$86,900
Net cash provided by operating activates:		$265,800
Cash flows from investing activities:
Proceeds from sale of equipment	$3,000
Down payment for land ($180,000 − ($95,000 − $40,000))	($45,000)
Purchase of equipment ($520,000 − ($500,000 − $50,000))	($70,000)
Net cash used in investing activities		($112,000)
Cash flows from financing activities:
Reissue of treasury stock ($35,000 − $15,0000) + ($670,000 − $660,000)	$30,000
Long-term debt repaid ($390,000 − ($450,000 + $40,000))	($100,000)
Dividends paid by
Parent	($50,000)
Subsidiary to NCI ($40,000 − ($40,000 × 80%))	($8,000)
Net cash used by financing activities		($128,000)
Net change in cash		$25,800
Add: Beginning cash balance		$275,000
Ending cash balance		$300,800