Allen Co Held 80% of the Common Stock of Brewer Inc

question 26

Essay

Allen Co. held 80% of the common stock of Brewer Inc. and 40% of this subsidiary's convertible bonds. The following consolidated financial statements were for 2012 and 2013. Additional Information:
1. Bonds were issued during 2013 by the parent for cash.
2. Amortization of a database acquired in the original combination amounted to $7,000 per year.
3. A building with a cost of $84,000 but a $42,000 book value was sold by the parent for cash on May 11, 2013.
4. Equipment was purchased by the subsidiary on July 23, 2013, using cash.
5. Late in November 2013, the parent issued common stock for cash.
6. During 2013, the subsidiary paid dividends of $14,000.
Required:
Prepare a consolidated statement of cash flows for this business combination for the year ending December 31, 2013. Either the direct method or the indirect method may be used.

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Definitions:

Costs

An amount that must be paid or spent to buy or obtain something.

Factory Overhead

All indirect costs associated with manufacturing, such as utilities, maintenance, and salaries of supervisors, not directly tied to a specific product.

Direct Materials

Raw materials that are directly traceable to the manufacturing of a product and are an integral part of the finished product.

Conversion Costs

The sum of labor and overhead expenses incurred in the process of converting raw materials into finished goods.