Question

Paridon Motors purchases an 80% interest in Snap Battery Company on January 1, 2012, for $700,000 cash. At that date, Snap Battery Company has the following stockholders’ equity:
Common stock ($10 par). . . . . . . . . . . . . . . . . . . . . . $100,000
Paid-in capital in excess of par . . . . . . . . . . . . . . . . . 300,000
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . 250,000
Total stockholders’ equity. . . . . . . . . . . . . . . . . . . . $650,000
Any excess of cost over book value is attributed to goodwill. A statement of cash flows is being prepared for 2015. For each of the following situations, indicate the impact on the cash flow statement for 2015:
1. Adjustment resulting from the original acquisition of the controlling interest.
2. Snap Battery Company issues 2,000 shares of common stock for $90 per share on January 1, 2015. At the time, the stockholders’ equity of Snap Battery is $800,000. Paridon Motors purchases 1,000 shares.
3. Paridon Motors purchases at 102, $100,000 of face value, 10% annual interest bonds issued by Snap Battery Company at face value on January 1, 2013. Paridon purchases the bonds on January 1, 2015.
4. Snap Battery purchases a production machine from Paridon Motors on July 1, 2015, for $80,000. Paridon’s cost is $60,000, and accumulated depreciation is $20,000.


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  • CreatedApril 13, 2015
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