B) Rhonica Company acquires an 80% interest in Kemar Company for $640,000 cash on January 1,...

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B) Rhonica Company acquires an 80% interest in Kemar Company for $640,000 cash on January 1, 2021. The NCI has a fair value of $160,000. Any excess of cost over book value is attributed to goodwill. To help pay for the acquisition, Rhonica Company issues 5,000 shares of its common stock with a fair value of $70 per share. Kemar's balance sheet on the date of the purchase is as follows: Assets Liabilities and Equity Cash Inventory $20,000 Current liabilities 140,000 Bonds payable $110,000 100,000 Property, plant, and equipment (net) 550,000 Common stock ($10 par) Retained earnings 200,000 300,000 Total $710,000 Total $710,000 Controlling share of net income for 2021 is $150,000, net of the noncontrolling interest of $10,000. Rhonica declares and pays dividends of $10,000, and Kemar declares and pays dividends of $5,000. There are no purchases or sales of property, plant or equipment during the year. Comparative balance sheet data are as follows: Cash Inventory Property, plant, and equipment (net) Goodwill Current liabilities Bonds payable NCI Controlling interest: Common stock ($10 par) Additional paid-in capital Retained earnings Required: December 31, 2020 December 31, Parent only 2021 Consolidated $ 300,000 $ 219,000 220,000 800,000 454,000 1,230,000 0 300,000 (160,000) (284,000) (200,000) (300,000) 0 (169,000) (200,000) (250,000) (300,000) (600,000) (460,000) (600,000) 0 0 Prepare a consolidated statement of cash flows using the indirect method for Rhonica Company and its subsidiary for the year ended December 31, 2021. [16 marks] B) Rhonica Company acquires an 80% interest in Kemar Company for $640,000 cash on January 1, 2021. The NCI has a fair value of $160,000. Any excess of cost over book value is attributed to goodwill. To help pay for the acquisition, Rhonica Company issues 5,000 shares of its common stock with a fair value of $70 per share. Kemar's balance sheet on the date of the purchase is as follows: Assets Liabilities and Equity Cash Inventory $20,000 Current liabilities 140,000 Bonds payable $110,000 100,000 Property, plant, and equipment (net) 550,000 Common stock ($10 par) Retained earnings 200,000 300,000 Total $710,000 Total $710,000 Controlling share of net income for 2021 is $150,000, net of the noncontrolling interest of $10,000. Rhonica declares and pays dividends of $10,000, and Kemar declares and pays dividends of $5,000. There are no purchases or sales of property, plant or equipment during the year. Comparative balance sheet data are as follows: Cash Inventory Property, plant, and equipment (net) Goodwill Current liabilities Bonds payable NCI Controlling interest: Common stock ($10 par) Additional paid-in capital Retained earnings Required: December 31, 2020 December 31, Parent only 2021 Consolidated $ 300,000 $ 219,000 220,000 800,000 454,000 1,230,000 0 300,000 (160,000) (284,000) (200,000) (300,000) 0 (169,000) (200,000) (250,000) (300,000) (600,000) (460,000) (600,000) 0 0 Prepare a consolidated statement of cash flows using the indirect method for Rhonica Company and its subsidiary for the year ended December 31, 2021. [16 marks]

Answer rating: 100% (QA)

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