Question

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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  • CreatedJune 08, 2015
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