Alford Company and its 80 percent–owned subsidiary, Knight, have the following income statements for 2013:

	Alford	Knight
Revenues	$(500,000)	$(230,000)
Cost of goods sold	300,000	140,000
Depreciation and amortization	40,000	10,000
Other expenses	20,000	20,000
Gain on sale of equipment	(30,000)	-0-
Equity in earnings of Knight	(36,200)	-0-
Net income	$(206,200)	$ (60,000)

Additional Information for 2013

•Intra-entity inventory transfers during the year amounted to $90,000. All intra-entity transfers were downstream from Alford to Knight.

•Unrealized inventory profits at January 1 were $6,000, but at December 31, they are $9,000.

•Annual excess amortization expense resulting from the acquisition is $ 11,000.

•Knight paid dividends totaling $20,000.

•The noncontrolling interest’s share of the subsidiary’s income is $9,800.

•During the year, consolidated inventory rose by $11,000 while accounts receivable and accounts payable declined by $8,000 and $6,000, respectively.

Using either the direct or indirect method, compute net cash flows from operating activities during the period for the business combination.

Answer rating: 100% (QA)

Answer By Using Direct Method Cash revenue Book values Intra entity transfers Decrease ... View the full answer