Pokey Corporation acquired 80 percent ownership of Stereo Company on January 1, 20X6, at underlying book value.
Question:
Pokey Corporation acquired 80 percent ownership of Stereo Company on January 1, 20X6, at underlying book value. At that date, the fair value of the noncontrolling interest was equal to 20 percent of the book value of Stereo Company. Consolidated balance sheets at January 1, 20X8, and December 31, 20X8, are as follows: (10 points)
Item | Jan 1, 20X8 | Dec 31, 20X8 | ||||||||||
Cash | $ | 50,000 | $ | 80,000 | ||||||||
Accounts Receivable | 75,000 | 90,000 | ||||||||||
Inventory | 85,000 | 100,000 | ||||||||||
Land | 60,000 | 80,000 | ||||||||||
Buildings and Equipment | 300,000 | 350,000 | ||||||||||
Less: Accumulated Depreciation | (90,000 | ) | (120,000 | ) | ||||||||
Patents | 12,000 | 10,000 | ||||||||||
Total Assets | $ | 492,000 | $ | 590,000 | ||||||||
Accounts Payable | $ | 40,000 | $ | 58,000 | ||||||||
Wages Payable | 20,000 | 16,000 | ||||||||||
Notes Payable | 150,000 | 175,000 | ||||||||||
Common Stock ($5 par value) | 100,000 | 100,000 | ||||||||||
Retained Earnings | 162,000 | 218,000 | ||||||||||
Noncontrolling Interest | 20,000 | 23,000 | ||||||||||
Total Liabilities and Equities | $ | 492,000 | $ | 590,000 | ||||||||
The consolidated income statement for 20X8 contained the following amounts:
Sales | $ | 400,000 | ||||||
Cost of Goods Sold | $ | 172,000 | ||||||
Wage Expense | 45,000 | |||||||
Depreciation Expense | 30,000 | |||||||
Interest Expense | 12,000 | |||||||
Amortization Expense | 2,000 | |||||||
Other Expenses | 52,000 | (313,000 | ) | |||||
Consolidated Net Income | $ | 87,000 | ||||||
Income to Noncontrolling Interest | (6,000 | ) | ||||||
Income to Controlling Interest | $ | 81,000 | ||||||
Pokey and Stereo paid dividends of $25,000 and $15,000, respectively, in 20X8.
Required:
1) Prepare a worksheet to develop a consolidated statement of cash flows for 20X8 using the indirect method of computing cash flows from operations.
2) Prepare a consolidated statement of cash flows for 20X8.
Fundamentals of Advanced Accounting
ISBN: 978-0077862237
6th edition
Authors: Joe Ben Hoyle, Thomas Schaefer, Timothy Doupnik