Question

Bolero Company holds 70 percent of the common stock of Rivera, Inc., and 30 percent of this subsidiary's convertible bonds. The following consolidated financial statements are for 2017 and 2018: $ 2017 (905,000) 611,000 101,000 0 Revenues Cost of goods sold Depreciation and amortization Gain on sale of building Interest expense Consolidated net income to noncontrolling interest to parent company Retained earnings, 1/1 Net income Dividends declared Retained earnings, 12/31 Cash Accounts receivable Inventory Buildings and equipment (net) Databases Total assets Accounts payable Bonds payable Noncontrolling interest in Rivera Common stock Additional paid-in capital Retained earnings Total liabilities and equities 2018 $(1,035, 000) 651,000 122,000 (31,000) 41,000 (252,000) 22,000 $ (230,000) $ (382,000) (230,000) 111,000 $ (501,000) 182,000 151,000 362,000 713,000 156,000 $ 1,564,000 $ (112,000) (522,000) ( 62,000) (141,000) (226,000) (501,000) $ (1,564,000) 41,000 (152,000) 20,000 $ (132,000) $ (311,000) (132,000) 61,000 $ (382,000) $ 91,000 172,000 211,000 651,000 172,000 $ 1,297,000 $ (153,000) (411,000) (43,000) (120,000) (188,000) (382,000) $(1,297,000) $ Additional Information for 2018 • The parent issued bonds during the year for cash • Amortization of databases amounts to $16,000 per year. • The parent sold a building with a cost of $82,000 but a $41,000 book value for cash on May 11. • The subsidiary purchased equipment on July 23 for $209,000 in cash. • Late in November, the parent issued stock for cash. • During the year, the subsidiary paid dividends of $10,000. Both parent and subsidiary pay dividends in the same year as declared. Prepare a consolidated statement of cash flows for this business combination for the year ending December 31, 2018. (Use indirect method) (Negative amounts and amounts to be deducted should be indicated by a minus sign.)

Answer 1

BOLERO COMPANY AND CONSOLIDATED SUBSIDIARY RIVERA

Consolidated Statement of Cash Flows

Year Ending December 31, 2018
(Using Indirect method)

      CASH FROM OPERATING ACTIVITIES Amounts(In$)

            Consolidated net income.......................................................                                    252,000

            Adjustment from accrual to cash:

                  Depreciation and amortization ......................................                                    122,000

                  Gain on sale of building ..................................................                                     (31,000)

                  Decrease in accounts receivable ....................................                                      21,000

                  Increase in inventory ......................................................                                   (151,000)

                  Decrease in accounts payable ........................................                                     (41,000)

            Net cash flow from operating activities ...............................                                    172,000

      CASH FLOWS FROM INVESTING ACTIVITIES

            Sale of building .....................................................................              72,000

            Purchase of equipment (given).............................................           (209,000)                      

                  Net cash flow from investing activities...........................                                   (137,000)

      CASH FLOWS FROM FINANCING ACTIVITIES

            Dividends paid ......................................................................           (113,000)

            Issuance of bonds ..................................................................            110,000

            Issuance of common stock ....................................................              59,000                       

                  Net cash flow from financing activities ..........................                                      56,000

      Net increase in cash during 2018................................................                                      91,000

      Cash, January 1, 2018..................................................................                                      91,000

      Cash, December 31, 2018...........................................................                                    182,000