The following Year 1 consolidated cash flow statement was prepared for Standard Manufacturing Corp. and its 60%-owned subsidiary, Pritchard Windows Inc.:

Required:
(a) Did the loss on the sale of equipment shown above result from a sale to an affiliate or a non-affiliate? Explain.
(b) Explain why the amortization of bond premium is treated as a deduction from net income in arriving at net cash flow from operations.
(c) Determine the net income of Pritchard Windows for Year 1. (Assume no intercompany transactions or unrealized profits and that the only change in the unamortized acquisition differential during the year was the goodwill impairment loss.)
(d) Explain why dividends to non-controlling shareholders are not shown as a dividend in the consolidated retained earnings statement but are shown as a distribution of cash in the consolidated cash flow statement.
(e) Determine the amount of dividends paid by Pritchard Windows in Year 1.

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STANDARD MANUFACTURING CORP. CONSOLIDATED CASH FLOW STATEMENT for the Year Ended December 31, Year 1 Cash flows from operating activities: Consolidated net income Non-cash items included in income $129,800 Depreciation Goodwill impairment loss Bond premium amortization Loss on sale of equipment Decrease in inventory Increase in accounts receivable 45,200 1,000 (2,000) 23,000 20,000 12 Net cash provided by operating activities $205,000 Cash flows from investing activities Purchase of buildings Sale of equipment (150,000) 60,000 Net cash used in investing activities (90,000) Cash flows from financing activities Dividends paid (50,000) (6,000) 100,000 (120,000) To Standard's shareholders To non-controlling shareholders Bond issue Preferred share redemption (76,000) 39,000 50,000 S 89,000 Net cash used in financing activities Net increase in cash Cash balance, January 1 Cash balance, December 31