Parento Inc. owns 80% of Santana Corp. The consolidated financial statements of Parento follow:

Parento Inc. purchased its 80% interest in Santana Corp. on January 1, Year 2, for $114,000 when Santana had net assets of $90,000. The acquisition differential was allocated $24,000 to databases (10-year life), with the balance allocated to equipment (20-year life). Parento issued $80,000 in bonds on December 31, Year 4.
Santana reported a net income of $24,000 for Year 4 and paid dividends of $8,000.
Selling and administrative expense includes the following:
Depreciation of buildings and equipment.......... $37,000
Database amortization .................. 2,400
Loss on land sale................... 2,000
Parento reported a Year 4 equity method income of $47,880 and paid dividends of $14,400.
Required:
(a) Prepare a consolidated cash flow statement for Year 4.
(b) Why are 100% of the dividends paid by Santana not shown as a cash outflow on the cash flow statement?

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PARENTO INC CONSOLIDATED BALANCE SHEET at December 31, Year 4 Year 3 $ 49,800 126,000 192,000 114,000 510,000 (168,000 19,200 $843,000 $ 31,200 27,000 240,000 10,800 180,000 330,000 24,000 $843,000 Year 4 Cash Accounts receivable Inventory Land Buildings and equipment Accumulated depreciation Databases $118,600 115,000 232,000 86,000 598,000 (205,000) 16,800 $961,400 $54,400 7,200 320,000 9,600 180,000 363,480 26,720 $961,400 Accounts payable Accrued liabilities Bonds payable Bond premium Common shares Retained earnings Non-controlling interest PARENTO INC CONSOLIDATED INCOME STATEMENT for the Year Ended December 31, Year 4 $960,000 Sales Cost of sales Selling expense Administrative expense Interest expense Income tax Net income Attributable to 535,000 144,600 159,800 31,400 37,000 907,800 $ 52,200 $47,880 4,320 Parento's shareholders Non-controlling interest