Chapter 10 – Additional Consolidation Reporting Issues
P10-22 Consolidated Statement of Cash Flows
Weatherbee Company and Sun Corporation
Consolidation Cash Flow Worksheet
Year Ended December 31, 20X6
Balance
Balance
Item
1/1/X6
Debit
Credit
12/31/X6
Cash
54,000
(a) 21,000
75,000
Accounts Receivable
121,000
(b) 10,000
111,000
Inventory
230,000
(c)130,000
360,000
Land
95,000
(d) 5,000
100,000
Buildings and Equipment
800,000
(e)150,000
650,000
1,300,000
1,296,000
Accumulated Depreciation
290,000
(e)100,000
(f) 40,000
230,000
Accounts Payable
90,000
(g) 15,000
105,000
Bonds Payable
300,000
(h) 50,000
250,000
Common Stock
300,000
300,000
Retained Earnings
290,000
(i)
65,000
(j) 148,000
373,000
Noncontrolling Interest
30,000
(k) 4,000
(j) 12,000
38,000
1,300,000
375,000
375,000
1,296,000
Cash Flows from Operating Activities:
Consolidated Net Income
(j) 160,000
Depreciation Expense
(f) 40,000
Gain on Sale of Equipment
(e) 30,000
Changes in Operating Assets and Liabilities:
Decrease in Accounts Receivable
(b) 10,000
Increase in Inventory
(c)130,000
Increase in Accounts Payable
(g) 15,000
Cash Flows from Investing Activities:
Sale of Buildings and Equipment
(e) 80,000
Purchase of Land
(d) 5,000
Cash Flows from Financing Activities:
Bond Retirement
(h) 50,000
Dividends Paid:
To Weatherbee Company Shareholders
(i) 65,000
To Noncontrolling Shareholders
(k) 4,000
Increase in Cash
(a) 21,000
305,000
305,000
P10-23 Consolidated Statement of Cash Flows — Direct Method
Weatherbee Company and Sun Corporation
Consolidation Cash Flow Worksheet
Year Ended December 31, 20X6
Balance
Balance
Item
1/1/X6
Debit
Credit
12/31/X6
Cash
54,000
(a) 21,000
75,000
Accounts Receivable
121,000
(b) 10,000
111,000
Inventory
230,000
(c) 130,000
360,000
Land
95,000
(d) 5,000
100,000
Buildings and Equipment
800,000
(e) 150,000
650,000
1,300,000
1,296,000
Accumulated Depreciation
290,000
(e) 100,000
(f)
40,000
230,000
Accounts Payable
90,000
(c) 15,000
105,000
Bonds Payable
300,000
(g) 50,000
250,000
Common Stock
300,000
300,000
Retained Earnings
290,000
(h) 65,000
(i)
148,000
373,000
Noncontrolling Interest
30,000
(j) 4,000
(i) 12,000
38,000
1,300,000
375,000
375,000
1,296,000
Sales
1,070,000
(b)1,070,000
Gain on Sale of Equipment
30,000
(e) 30,000
1,100,000
Cost of Goods Sold
750,000
(c) 750,000
Depreciation Expense
40,000
(f)
40,000
Other Expenses
150,000
(c) 150,000
940,000
Consolidated Net Income
160,000
(i) 160,000
1,100,000
1,100,000
Cash Flows from Operating Activities:
Cash Received from Customers
(b)1,080,000
Cash Paid to Suppliers
(c)1,015,000
Cash Flows from Investing Activities:
Sale of Buildings and Equipment
(e) 80,000
Purchase of Land
(d) 5,000
Cash Flows from Financing Activities:
Bond Retirement
(g) 50,000
Dividends Paid
To Weatherbee Company Shareholders
(h) 65,000
To Noncontrolling Shareholders
(j)
4,000
Increase in Cash
(a) 21,000
1,160,000
1,160,000
P10-24 Consolidated Statement of Cash Flows [AICPA Adapted]
Brimer, Inc., and Subsidiary
Consolidated Statement of Cash Flows
For the Year Ended December 31, 20X6
Cash Flows from Operating Activities:
Consolidated Net Income
$231,000
Adjustments for noncash items:
Depreciation
82,000
[1]
Goodwill Impairment Loss
3,000
Gain on Sale of Equipment
(6,000)
Changes in operating assets and liabilities:
Decrease in Allowance to Reduce
Marketable Securities to Market
(11,000)
Decrease in Accounts Receivable
22,000
Increase in Inventories
(70,000)
Increase in Accounts Payable
and Accrued Liabilities
121,000
Increase in Deferred Income Taxes
12,000
Total Adjustments
153,000
Net Cash Provided by Operating Activities
$384,000
Cash Flows from Investing Activities:
Purchase of Equipment
$(127,000)
Sale of Equipment
40,000
Net Cash Used in Investing Activities
(87,000)
Cash Flows from Financing Activities:
Payment on Note Payable
$(150,000)
Sale of Treasury Stock
44,000
Cash Dividend Paid by Parent Company
(58,000)
Cash Dividend Paid to Minority Stockholders
of Subsidiary
(15,000)
[2]
Net Cash Used in Financing Activities
(179,000)
Net Increase in Cash
$118,000
Cash at Beginning of Year
195,000
Cash at End of Year
$313,000
Supplemental Schedule of Noncash Investing and Financing Activities:
Issuance of Common Stock to Purchase Land
$215,000
P10-24 (continued)
Explanations of Amounts:
[1]
Depreciation:
Accumulated depreciation, Dec. 31, 20X6
$199,000
Accumulated depreciation on equipment sold
($62,000 – $34,000)
28,000
227,000
Deduct accumulated depreciation, Dec. 31, 20X5
(145,000)
Depreciation for 20X6
$ 82,000
[2]
Cash dividends paid to minority stockholders of subsidiary:
Cash dividend paid by Dore Corporation
$ 50,000
Minority ownership
x 0.30
Cash dividend paid to minority stockholders in 20X6
$ 15,000
P10-25 Statement of Cash Flows Prepared from Consolidation Worksheet
a.
Worksheet for consolidated statement of cash flows:
Detecto Corporation and Strand Company
Consolidation Cash Flow Worksheet
Year Ended December 31, 20X3
Balance
Balance
Item
1/1/X3
Debit
Credit
12/31/X3
Cash
92,000
(a) 30,200
61,800
Accounts Receivable
135,000
(b) 15,000
120,000
Inventory
140,000
(c) 59,000
199,000
Land
75,000
(d) 5,000
80,000
Buildings and Equipment
400,000
(e)100,000
(f)
20,000
520,000
Patents
30,000
(g) 5,000
25,000
872,000
1,005,800
Accumulated Depreciation
210,000
(h) 20,000
230,000
Accounts Payable
114,200
(i) 19,200
95,000
Bonds Payable
90,000
(j) 100,000
190,000
Common Stock
100,000
100,000
Retained Earnings
273,000
(k)
50,000
(l)
79,400
302,400
Noncontrolling Interest
84,800
(m) 8,000
(l) 11,600
88,400
872,000
261,200
261,200
1,005,800
Cash Flows from Operating Activities:
Consolidated Net Income
(l) 91,000
Amortization Expense
(g) 5,000
Depreciation Expense
(h) 20,000
Changes in Operating Assets and Liabilities:
Decrease in Accounts Receivable
(b) 15,000
Increase in Inventory
(c) 59,000
Decrease in Accounts Payable
(i)
19,200
Cash Flows from Investing Activities:
Purchase of Land
(d) 5,000
Acquisition of Buildings and
Equipment from Bond Issue
(e)100,000
Purchase of Buildings and Equipment
(f)
20,000
Cash Flows from Financing Activities:
Dividends Paid:
To Detecto Corp. Shareholders
(k)
50,000
To Noncontrolling Shareholders
(m) 8,000
Issuance of Bonds for Buildings
and Equipment
(j) 100,000
Decrease in Cash
(a) 30,200
261,200
261,200
P10-25 (continued)
b.
Consolidated cash flow statement for 20X3:
Detecto Corporation and Subsidiary
Consolidated Statement of Cash Flows
For the Year Ended December 31, 20X3
Cash Flows from Operating Activities:
Consolidated Net Income
$ 91,000
Adjustments for noncash items:
Included in Income:
Amortization Expense
5,000
Depreciation Expense
20,000
Changes in operating assets and liabilities:
Decrease in Accounts Receivable
15,000
Increase in Inventory
(59,000)
Decrease in Accounts Payable
(19,200)
Net Cash Provided by Operating Activities
$ 52,800
Cash Flows from Investing Activities:
Purchase of Land
$ (5,000)
Purchase of Buildings and Equipment
(20,000)
Net Cash Used in Investing Activities
(25,000)
Cash Flows from Financing Activities:
Dividends Paid:
To Parent Company Shareholders
$(50,000)
To Noncontrolling Shareholders
(8,000)
Net Cash Received from
Financing Activities
(58,000)
Net Decrease in Cash
$(30,200)
Cash Balance at Beginning of Year
92,000
Cash Balance at End of Year
$ 61,800
Supplemental Schedule of Noncash Investing and Financing Activities:
Issuance of Bonds to Purchase Equipment
$100,000
P10-26 Midyear Purchase of Controlling Interest
a.
Equity-method entries recorded by Mega Theaters during 20X1:
Investment in Blase Co.
765,000
Cash
765,000
Record purchase of Blase Company stock.
Investment in Blase Co.
97,750
Income from Blase Co.
97,750
Record equity-method income: ($175,000 – $60,000) x 0.85
Cash
25,500
Investment in Blase Co.
25,500
Record dividends from Blase Company: $30,000 x 0.85
P10-26 (continued)
b. Consolidation entries, December 31, 20X1:
Sales
240,000
Operating Expenses
180,000
Dividends Declared
10,000
Retained Earnings
50,000
Book Value Calculations:
NCI
15%
+
Mega
Theaters
85%
=
Common
Stock
+
Add.
Paid-In
Cap.
+
Retained
Earnings
Book Value At Acquisition Date
120,000
680,000
100,000
500,000
200,000
+ Net Income
17,250
97,750
115,000
– Dividends
(4,500)
(25,500)
(30,000)
Ending Book Value
132,750
752,250
100,000
500,000
285,000
Basic Consolidation Entry
Common Stock
100,000
Additional Paid-in Capital
500,000
Retained Earnings
200,000
Income from Blase Co.
97,750
NCI in NI of Blase Co.
17,250
Dividends Declared
30,000
Investment in Blase Co.
752,250
NCI in NA of Blase Co.
132,750
Excess Value (Differential) Calculations:
NCI 15%
+
Mega Theaters
85%
=
Goodwill
Beginning balance
15,000
85,000
100,000
Changes
0
0
0
Ending balance
15,000
85,000
100,000
Excess Value (Differential) Reclassification Entry:
Goodwill
100,000
Investment in Blase Co.
85,000
NCI in NA of Blase Co.
15,000
Computation of differential
Compensation given by Mega Theaters
$765,000
Fair value of noncontrolling interest
135,000
Total fair value
$900,000
Book value of Blase stock:
Common stock
$100,000
Additional paid-in capital
500,000
Retained earnings, January 1
150,000
First quarter undistributed
earnings ($60,000 – $10,000)
50,000
Book value, April 1
(800,000)
Goodwill
$100,000
P10-27 Consolidation Involving a Midyear Purchase
a.
Journal entries recorded by Famous Products:
Investment in Sanford Co.
247,500
Common Stock
80,000
Additional Paid-In Capital
167,500
Record purchase of Sanford Company stock:
$80,000 = $10 x 8,000 shares
$167,500 = $247,500 – $80,000
Investment in Sanford Co.
13,500
Income from Sanford Co.
13,500
Record equity-method income: $13,500 = $15,000 x 0.90
Cash
9,000
Investment in Sanford Co.
9,000
Record dividend received from Sanford: $9,000 = $10,000 x 0.90
b. Consolidation entries, December 31, 20X2:
Pre-acquisition Income and Dividend Consolidation Entry:
Sales
205,000
Cost of Goods Sold
126,000
Depreciation Expense
16,000
Other Expenses
18,000
Dividends Declared
20,000
Retained Earnings
25,000
Book Value Calculations:
NCI
10%
+
Famous
Products
90%
=
Common
Stock
+
Retained
Earnings
Book Value At Acquisition Date
27,500
247,500
150,000
125,000
+ Net Income
1,500
13,500
15,000
– Dividends
(1,000)
(9,000)
(10,000)
Ending Book Value
28,000
252,000
150,000
130,000
Basic Consolidation Entry
Common Stock
150,000
Retained Earnings
125,000
Income from Sanford Co.
13,500
NCI in NI of Sanford Co.
1,500
Dividends Declared
10,000
Investment in Sanford Co.
252,000
NCI in NA of Sanford Co.
28,000
P10-27 (continued)
c.
Famous
Products
Sanford
Co.
Consolidation
Entries
DR
CR
Consolidated
Income Statement
Sales
390,000
250,000
205,000
435,000
Less: COGS
(305,000)
(145,000)
126,000
(324,000)
Less: Depreciation Expense
(25,000)
(20,000)
16,000
(29,000)
Less: Other Expenses
(14,000)
(25,000)
18,000
(21,000)
Income from Sanford Co.
13,500
0
13,500
0
Consolidated Net Income
59,500
60,000
218,500
160,000
61,000
NCI in Net Income
1,500
(1,500)
Controlling Interest in Net Income
59,500
60,000
220,000
160,000
59,500
Statement of Retained Earnings
Beginning Balance
135,000
100,000
125,000
25,000
135,000
Net Income
59,500
60,000
220,000
160,000
59,500
Less: Dividends Declared
(40,000)
(30,000)
10,000
(40,000)
20,000
Ending Balance
154,500
130,000
345,000
215,000
154,500
Balance Sheet
Cash
85,000
50,000
135,000
Accounts Receivable
100,000
60,000
160,000
Inventory
150,000
100,000
250,000
Buildings and Equipment
400,000
340,000
740,000
Less: Accumulated Depreciation
(105,000)
(65,000)
(170,000)
Investment in Sanford Co.
252,000
0
252,000
0
Total Assets
882,000
485,000
0
252,000
1,115,000
Accounts Payable
40,000
50,000
90,000
Taxes Payable
70,000
55,000
125,000
Bonds Payable
250,000
100,000
350,000
Common Stock
200,000
150,000
150,000
200,000
Additional Paid-In Capital
167,500
0
167,500
Retained Earnings
154,500
130,000
345,000
215,000
154,500
NCI in NA of Sanford Co.
28,000
28,000
Total Liabilities & Equity
882,000
485,000
495,000
243,000
1,115,000