Question
Point Company holds 80 percent ownership of Shoot Company. The consolidated balance sheets as of December 31, 20X3, and December 31, 20X4, are as follows:
Point Company holds 80 percent ownership of Shoot Company. The consolidated balance sheets as of December 31, 20X3, and December 31, 20X4, are as follows:
Dec. 31, 20X3 | Dec. 31, 20X4 | |||||||||
Assets | ||||||||||
Cash | $ | 83,000 | $ | 181,000 | ||||||
Accounts Receivable | 210,000 | 175,000 | ||||||||
Inventory | 320,000 | 370,000 | ||||||||
Land | 190,000 | 160,000 | ||||||||
Buildings & Equipment | 850,000 | 980,000 | ||||||||
Less: Accumulated Depreciation | (280,000 | ) | (325,000 | ) | ||||||
Goodwill | 40,000 | 28,000 | ||||||||
Total Assets | $ | 1,413,000 | $ | 1,569,000 | ||||||
Liabilities and Owners Equity | ||||||||||
Accounts Payable | $ | 52,000 | $ | 74,000 | ||||||
Interest Payable | 45,000 | 30,000 | ||||||||
Bonds Payable | 400,000 | 500,000 | ||||||||
Bond Premium | 18,000 | 16,000 | ||||||||
Noncontrolling Interest | 40,000 | 44,000 | ||||||||
Common Stock | 300,000 | 300,000 | ||||||||
Additional Paid-In Capital | 70,000 | 70,000 | ||||||||
Retained Earnings | 488,000 | 535,000 | ||||||||
Total Liabilities and Owners Equity | $ | 1,413,000 | $ | 1,569,000 | ||||||
The 20X4 consolidated income statement contained the following amounts:
Sales | $ | 600,000 | ||||||
Cost of Goods Sold | $ | 375,000 | ||||||
Depreciation Expense | 45,000 | |||||||
Interest Expense | 69,000 | |||||||
Loss on Sale of Land | 20,000 | |||||||
Goodwill Impairment Loss | 12,000 | (521,000 | ) | |||||
Consolidated Net Income | $ | 79,000 | ||||||
Income to Noncontrolling Interest | (7,000 | ) | ||||||
Income to Controlling Interest | $ | 72,000 | ||||||
Point acquired its investment in Shoot on January 1, 20X2, for $176,000. At that date, the fair value of the noncontrolling interest was $44,000, and Shoot reported net assets of $150,000. A total of $40,000 of the differential was assigned to goodwill. The remainder of the differential was assigned to equipment with a remaining life of 20 years from the date of combination. Point sold $100,000 of bonds on December 31, 20X4, to assist in generating additional funds. Shoot reported net income of $35,000 for 20X4 and paid dividends of $15,000. Point reported 20X4 equity-method net income of $80,000 and paid dividends of $25,000. Required: a. Prepare a worksheet to develop a consolidated statement of cash flows for 20X4 using the direct method of computing cash flows from operations. (Values in the first two columns (the "parent" and "subsidiary" balances) that are to be deducted should be indicated with a minus sign, while all values in the "Consolidation Entries" columns should be entered as positive values. For accounts where multiple adjusting entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet.)
b. Prepare a consolidated statement of cash flows for 20X4. (Amounts to be deducted should be indicated with a minus sign.)
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