Company S Has Been an 80%-Owned Subsidiary of Company P

question 11

Essay

Company S has been an 80%-owned subsidiary of Company P since January 1, 20X7. The determination and distribution of excess schedule prepared at the time of purchase was as follows:
On January 2, 20X9, Company P issued $120,000 of 8% bonds at face value to help finance the purchase of 25% of the outstanding common stock of Alpha Company for $200,000. No excess resulted from this transaction. Alpha earned $100,000 net income during 20X9 and paid $20,000 in dividends.
The only change in plant assets during 20X9 was that Company S sold a machine for $10,000. The machine had a cost of $60,000 and accumulated depreciation of $40,000. Depreciation expense recorded during 20X9 was as follows:
The 20X9 consolidated income was $180,000, of which the NCI was $10,000. Company P paid dividends of $12,000, and Company S paid dividends of $10,000.
Consolidated inventory was $287,000 in 20X8 and $223,000 in 20X9; consolidated current liabilities were $246,000 in 20X8 and $216,700 in 20X9. Cash increased by $203,700.
Required:
Using the indirect method and the information provided, prepare the 20X9 consolidated statement of cash flows for Company P. and its subsidiary, Company S.

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Definitions:

Mathematics

Mathematics is the abstract study of numbers, quantity, structure, space, and change, used as a tool in a wide range of disciplines.

Stockholders

Individuals or entities that own shares in a corporation, giving them a stake in the company's performance and potential profits.

Annual Shareholder Meetings

A yearly gathering where company executives report to shareholders on the firm's performance and strategy.

Receive Interest

Earning income on an investment, such as a bond or savings account, based on the interest rate over time.