Power Corporation's Controller Has Just Finished Preparing a Consolidated Balance

question 19

Multiple Choice

Power Corporation's controller has just finished preparing a consolidated balance sheet,income statement,and statement of changes in retained earnings for the year ended December 31,20X9.Power owns 80 percent of Setwork Corporation's stock,which it acquired at underlying book value on November 1,20X6.At that date,the fair value of the noncontrolling interest was equal to 20 percent of Setwork Corporation's book value.The following information is available:
Consolidated net income for 20X9 was $160,000.
Setwork reported net income of $50,000 for 20X9.
Power paid dividends of $30,000 in 20X9.
Setwork paid dividends of $10,000 in 20X9.
Power issued common stock on February,18,20X9,for a total of $100,000.
Consolidated wages payable decreased by $6,000 in 20X9.
Consolidated depreciation expense for the year was $15,000.
Consolidated accounts receivable decreased by $20,000 in 20X9.
Bonds payable of Power with a book value of $102,000 were retired for $100,000 on December 31,20X9.
Consolidated amortization expense on patents was $10,000 for 20X9.
Power sold land that it had purchased for $75,000 to a nonaffiliate for $80,000 on June 10,20X9.
Consolidated accounts payable decreased by $7,000 during 20X9.
Total purchases of equipment by Power and Setwork during 20X9 were $180,000.
Consolidated inventory increased by $36,000 during 20X9.
There were no intercompany transfers between Power and Setwork in 20X9 or prior years except for Setwork's payment of dividends.Power uses the indirect method in preparing its cash flow statement.
-Based on the preceding information,what amount will be reported in the consolidated cash flow statement as net cash used in financing activities for 20X9?

• A)$32,000
• B)$38,000
• C)$42,000
• D)$70,000

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Definitions:

Interest Rates

The cost of borrowing money or the return on investing, typically expressed as a percentage of the principal, and set by central banks or determined by the market.

Excess Reserves

The capital reserves held by a bank or financial institution in excess of what is required by regulators, creditors, or internal controls.

Actual Reserves

The total amount of funds that a bank has on deposit at the Federal Reserve, plus any cash physically held by the bank.

Reserve Requirement

A regulation set by central banks requiring commercial banks to hold a certain proportion of their deposits as reserves.