Homework Answers
SOLUTION
Cash flow from operating activities
| Cash flow from operating activities: | |
| Net income | 218,000 |
| Adjustments to net income: | |
| Equity in net earnings | (87,200) |
| Dividend received from Company | 67,200 |
| Net cash provided by operating activities | 198,000 |
Holding percentage = 48,000 / 120,000 = 40%
Equity in net earnings = Holding percentage * Net income
= 40% * 218,000 = 87,200
Dividend received = 48,000 * 1.40 = 67,200
Cash flow from investing activities
| Cash flow from investing activities | |
| Purchase of investments (48,000*$36) | (1,728,000) |
| Net cash used in investing activities | (1,728,000) |
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