Paridon Motors purchases an 80% interest in Snap Battery Company on January 1, 2012, for $700,000 cash.

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 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 10% annual interest bonds issued by Snap Battery Company at 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.
Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...