Chapter 10 – Additional Consolidation Reporting Issues
P10-18 (continued)
b.
Consolidated statement of cash flows for 20X3
Metal Corporation and Subsidiary
Consolidated Statement of Cash Flows
Year Ended December 31, 20X3
Cash Flows from Operating Activities
Consolidated Net Income
$ 83,500
Adjustments for noncash items:
Noncash Expenses, Revenue, Losses, and Gains
Included in Income:
Depreciation Expense
36,500
Amortization Expense
1,000
Changes in operating assets and liabilities
Increase in Accounts Receivable
(15,000)
Increase in Inventory
(8,000)
Increase in Accounts Payable
5,000
Decrease in Wages Payable
(6,000)
Net Cash Provided by Operating Activities
$97,000
Cash Flows from Investing Activities:
Purchase of Land
$(10,000)
Purchase of Buildings and Equipment
(35,000)
Net Cash Used in Investing Activities
(45,000)
Cash Flows from Financing Activities:
Increase in Notes Payable
$ 15,000
Dividends Paid to Parent Company Shareholders
(30,000)
Dividends Paid to Noncontrolling Shareholders
( 5,000)
Net Cash Used in Financing Activities
(20,000)
Net Increase in Cash
$ 32,000
Cash at Beginning of Year
68,500
Cash at End of Year
$100,500
P10-19 Preparing a Statement of Cash Flows – Direct Method
a.
Metal Corporation and Ocean Company
Consolidated Cash Flow Worksheet
Year Ended December 31, 20X3
Balance
Balance
Item
1/1/X3
Debit
Credit
12/31/X3
Cash
68,500
(a) 32,000
100,500
Accounts Receivable
82,000
(b) 15,000
97,000
Inventory
115,000
(c) 8,000
123,000
Land
45,000
(d)
10,000
55,000
Buildings and Equipment
515,000
(e)
35,000
550,000
Patents
5,000
(f) 1,000
4,000
830,500
929,500
Accumulated Depreciation
186,500
(g)
36,500
223,000
Accounts Payable
61,000
(c)
5,000
66,000
Wages Payable
26,000
(h)
6,000
20,000
Notes Payable
250,000
(j) 15,000
265,000
Common Stock
150,000
150,000
Retained Earnings
130,000
(k)
30,000
(l) 74,500
174,500
Noncontrolling Interest
27,000
(m) 5,000
(l) 9,000
31,000
830,500
141,000
141,000
929,500
Sales
490,000
(b)490,000
Cost of Goods Sold
259,000
(c)259,000
Wage Expense
55,000
(h) 55,000
Depreciation Expense
36,500
(g) 36,500
Interest Expense
16,000
(i)
16,000
Amortization Expense
1,000
(f)
1,000
Other Expenses
39,000
(c) 39,000
406,500
Consolidated Net Income
83,500
(l) 83,500
490,000
490,000
P10-19 (continued)
Cash Flows from Operating Activities:
Cash Received from Customers
(b) 475,000
Cash Paid to Suppliers
(c)301,000
Cash Paid to Employees
(h) 61,000
Cash Paid for Interest on Notes Payable
(i)
16,000
Cash Flows from Investing Activities:
Purchase of Land
(d)
10,000
Purchase of Buildings and Equipment
(e)
35,000
Cash Flows from Financing Activities:
Increase in Notes Payable
(j) 15,000
Dividends Paid:
To Metal Corporation Shareholders
(k) 30,000
To Ocean Company Shareholders
(m)
5,000
Increase in Cash
(a) 32,000
490,000
490,000
b.
Consolidated statement of cash flows for 20X3
Metal Corporation and Subsidiary
Consolidated Statement of Cash Flows
Year Ended December 31, 20X3
Cash Flows from Operating Activities:
Cash Received from Customers
$475,000
Cash Paid to Suppliers
$301,000
Cash Paid to Employees
61,000
Cash Paid for Interest on Notes Payable
16,000
(378,000)
Net Cash Provided by Operating Activities
$ 97,000
Cash Flows from Investing Activities:
Purchase of Land
$(10,000)
Purchase of Buildings and Equipment
(35,000)
Net Cash Used in Investing Activities
(45,000)
Cash Flows from Financing Activities:
Increase in Notes Payable
$15,000
Dividends Paid to Parent Company Shareholders
(30,000)
Dividends Paid to Noncontrolling Shareholders
( 5,000)
Net Cash Used in Financing Activities
(20,000)
Net Increase in Cash
$ 32,000
Cash at Beginning of Year
68,500
Cash at End of Year
$100,500
P10-19 (continued)
The FASB also requires the following reconciliation when the statement of cash flows is
prepared using the direct method:
Reconciliation of consolidated net income to net cash provided by operating
activities
Consolidated Net Income
$83,500
Adjustments for noncash items:
Depreciation Expense
$36,500
Amortization Expense
1,000
Changes in operating assets and liabilities:
Increase in Accounts Receivable
(15,000)
Increase in Inventory
(8,000)
Increase in Accounts Payable
5,000
Decrease in Wages Payable
(6,000)
Total Adjustments
13,500
Net Cash Provided by Operating Activities
$97,000
P10-20 Consolidated Statement of Cash Flows
a.
Traper Company and Arrow Company
Consolidation Cash Flow Worksheet
Year Ended December 31, 20X4
Balance
Balance
Item
1/1/X4
Debit
Credit
12/31/X4
Cash
83,000
(a) 98,000
181,000
Accounts Receivable
210,000
(b) 35,000
175,000
Inventory
320,000
(c) 50,000
370,000
Land
190,000
(d) 30,000
160,000
Buildings and Equipment
850,000
(e)130,000
980,000
Goodwill
40,000
(f)
12,000
28,000
1,693,000
1,894,000
Accum. Depreciation
280,000
(g) 45,000
325,000
Accounts Payable
52,000
(h) 22,000
74,000
Interest Payable
45,000
(i) 15,000
30,000
Bonds Payable
400,000
(j)
100,000
500,000
Bond Premium
18,000
(k)
2,000
16,000
Common Stock
300,000
300,000
Additional Paid-In Capital
70,000
70,000
Retained Earnings
488,000
(l) 25,000
(m) 72,000
535,000
Noncontrolling Interest
40,000
(n)
3,000
(m) 7,000
44,000
1,693,000
323,000
323,000
1,894,000
Cash Flows from Operating Activities:
Consolidated Net Income
(m) 79,000
Depreciation Expense
(g)
45,000
Goodwill Impairment Loss
(f) 12,000
Amortization of Bond Premium
(k) 2,000
Loss on Sale of Land
(d)
20,000
Changes in Operating Assets and Liabilities:
Decrease in Accounts Receivable
(b)
35,000
Increase in Inventory
(c) 50,000
Increase in Accounts Payable
(h)
22,000
Decrease in Interest Payable
(i)
15,000
Cash Flows from Investing Activities:
Sale of Land
(d)
10,000
Purchase of Buildings and Equipment
(e)130,000
Cash Flows from Financing Activities:
Sale of Bonds
(j)100,000
Dividends Paid:
To Traper Shareholders
(l)
25,000
To Noncontrolling Shareholders
(n) 3,000
Increase in Cash
(a) 98,000
323,000
323,000
P10-20 (continued)
Explanation of Worksheet Entries:
(a)
Increase in cash balance
(b)
Decrease in accounts receivable
(c)
Increase in inventory
(d)
Sale of land
(e)
Purchase of buildings and equipment
(f)
Goodwill impairment loss recognized in 20X4
(g)
Depreciation charges for 20X4
(h)
Increase in accounts payable
(i)
Decrease in interest payable
(j)
Sale of bonds
(k)
Amortize bond premium
(l)
Traper Company dividend $25,000
(m)
Consolidated net income $79,000
(n)
Arrow Company dividend $15,000 x 0.20
P10-20 (continued)
b.
Consolidated statement of cash flows for 20X4:
Traper Company and Subsidiary
Consolidated Statement of Cash Flows
For Year Ended December 31, 20X4
Cash Flows from Operating Activities:
Consolidated Net Income
$79,000
Adjustments for noncash items:
Noncash Expenses, Revenue, Losses, and Gains
Included in Income:
Depreciation Expense
45,000
Goodwill Impairment Loss
12,000
Amortization of Bond Premium
(2,000)
Loss on Sale of Land
20,000
Changes in operating assets and liabilities:
Decrease in Accounts Receivable
35,000
Increase in Inventory
(50,000)
Increase in Accounts Payable
22,000
Decrease in Interest Payable
(15,000)
Net Cash Provided by Operating Activities
$146,000
Cash Flows from Investing Activities:
Sale of Land
$ 10,000
Purchase of Buildings and Equipment
(130,000)
Net Cash Used in Investing Activities
(120,000)
Cash Flows from Financing Activities:
Sale of Bonds
$100,000
Dividends Paid:
To Parent Company Shareholders
(25,000)
To Noncontrolling Shareholders
(3,000)
Net Cash Provided by Financing Activities
72,000
Net Increase in Cash
$ 98,000
Cash Balance at Beginning of Year
83,000
Cash Balance at End of Year
$181,000
P10-21 Consolidated Statement of Cash Flows — Direct Method
a.
Traper Company and Arrow Company
Consolidation Cash Flow Worksheet
Year Ended December 31, 20X4
Balance
Balance
Item
1/1/X4
Debit
Credit
12/31/X4
Cash
83,000
(a) 98,000
181,000
Accounts Receivable
210,000
(b) 35,000
175,000
Inventory
320,000
(c) 50,000
370,000
Land
190,000
(d) 30,000
160,000
Buildings and Equipment
850,000
(e)130,000
980,000
Goodwill
40,000
(f)
12,000
28,000
1,693,000
1,894,000
Accum. Depreciation
280,000
(g)
45,000
325,000
Accounts Payable
52,000
(c) 22,000
74,000
Interest Payable
45,000
(h) 15,000
30,000
Bonds Payable
400,000
(i)
100,000
500,000
Bond Premium
18,000
(h) 2,000
16,000
Common Stock
300,000
300,000
Additional Paid-In
70,000
70,000
Capital
Retained Earnings
488,000
(j)
25,000
(k)
72,000
535,000
Noncontrolling Interest
40,000
(l)
3,000
(k)
7,000
44,000
1,693,000
323,000
323,000
1,894,000
Sales
600,000
(b)
600,000
Cost of Goods Sold
375,000
(c)375,000
Depreciation Expense
45,000
(g) 45,000
Interest Expense
69,000
(h) 69,000
Loss on Sale of Land
20,000
(d) 20,000
Goodwill Impairment Loss
12,000
(f)
12,000
521,000
Consolidated Net Income
79,000
(k) 79,000
600,000
600,000
P10-21 (continued)
Cash Flows from Operating Activities:
Cash Received from Customers
(b)635,000
Cash Paid to Suppliers
(c)403,000
Cash Paid for Interest on
Bonds Payable
(h) 86,000
Cash Flows from Investing Activities:
Sale of Land
(d) 10,000
Purchase of Buildings and Equipment
(e)130,000
Cash Flows from Financing Activities:
Sale of Bonds
(i)
100,000
Dividends Paid:
To Traper Shareholders
(j) 25,000
To Noncontrolling Shareholders
(l) 3,000
Increase in Cash
(a) 98,000
745,000
745,000
Explanation of Worksheet Entries:
(a) Increase in cash balance
(b) Payments received from customers
(c) Payments to suppliers
P10-21 (continued)
b.
Consolidated statement of cash flows for 20X4:
Traper Company and Subsidiary
Consolidated Statement of Cash Flows
For Year Ended December 31, 20X4
Cash Flows from Operating Activities:
Cash Received from Customers
$635,000
Cash Payments to Suppliers
$403,000
Cash Payments of Interest
86,000
(489,000)
Net Cash Provided by Operating Activities
$146,000
Cash Flows from Investing Activities:
Sale of Land
$ 10,000
Purchase of Buildings and Equipment
(130,000)
Net Cash Used in Investing Activities
(120,000)
Cash Flows from Financing Activities:
Sale of Bonds
$100,000
Dividends Paid:
To Parent Company Shareholders
(25,000)
To Noncontrolling Shareholders
(3,000)
Net Cash Provided by Financing Activities
72,000
Net Increase in Cash
$ 98,000
Cash Balance at Beginning of Year
83,000
Cash Balance at End of Year
$181,000
The FASB also requires the following reconciliation when the statement of cash flows is
prepared using the direct method:
Reconciliation of consolidated net income to net cash provided by operating
activities
Consolidated Net Income
$ 79,000
Adjustments for noncash items:
Depreciation Expense
$45,000
Goodwill Impairment Loss
12,000
Amortization of Bond Premium
(2,000)
Loss on Sale of Land
20,000
Changes in operating assets and liabilities:
Decrease in Accounts Receivable
35,000
Increase in Inventory
(50,000)
Increase in Accounts Payable
22,000
Decrease in Interest Payable
(15,000)
Total Adjustments
67,000
Net Cash Provided by Operating Activities
$146,000