Badco Inc. purchased a 90% interest in Lazytoo Company for $600,000 cash on January 1, 2026. Any
Question:
Badco Inc. purchased a 90% interest in Lazytoo Company for $600,000 cash on January 1, 2026. Any excess of implied over book value was attributed to depreciable assets with a 15- year remaining life (straight- line depreciation). To help pay for the acquisition, Badco issued $300,000, 20- year, 12% bonds at par value. Lazytoo’s balance sheet on the date of acquisition was as follows:
Consolidated net income for 2026 was $155,889. Badco declared and paid dividends of $10,000 and Lazytoo declared and paid dividends of $5,000. There were no purchases or sales of property, plant, and equipment during the year. At the end of 2026, the following information was also available:
Required:
Prepare a consolidated statement of cash flows using the indirect method for Badco and its subsidiary for the year ended December 31, 2026.
Step by Step Answer: