Question

Bolero Company holds 80 percent of the common stock of Rivera, Inc., and 30 percent of...

Bolero Company holds 80 percent of the common stock of Rivera, Inc., and 30 percent of this subsidiary’s convertible bonds. The following consolidated financial statements are for 2017 and 2018:

2017 2018
Revenues $ (915,000 ) $ (1,045,000 )
Cost of goods sold 613,000 653,000
Depreciation and amortization 103,000 126,000
Gain on sale of building 0 (33,000 )
Interest expense 43,000 43,000
Consolidated net income (156,000 ) (256,000 )
to noncontrolling interest 22,000 24,000
to parent company $ (134,000 ) $ (232,000 )
Retained earnings, 1/1 $ (313,000 ) $ (384,000 )
Net income (134,000 ) (232,000 )
Dividends declared 63,000 113,000
Retained earnings, 12/31 $ (384,000 ) $ (503,000 )
Cash $ 93,000 $ 186,000
Accounts receivable 176,000 153,000
Inventory 213,000 366,000
Buildings and equipment (net) 653,000 719,000
Databases 176,000 158,000
Total assets $ 1,311,000 $ 1,582,000
Accounts payable $ (155,000 ) $ (116,000 )
Bonds payable (413,000 ) (526,000 )
Noncontrolling interest in Rivera (45,000 ) (64,000 )
Common stock (124,000 ) (143,000 )
Additional paid-in capital (190,000 ) (230,000 )
Retained earnings (384,000 ) (503,000 )
Total liabilities and equities $ (1,311,000 ) $ (1,582,000 )

Additional Information for 2018

The parent issued bonds during the year for cash.

Amortization of databases amounts to $18,000 per year.

The parent sold a building with a cost of $86,000 but a $43,000 book value for cash on May 11.

The subsidiary purchased equipment on July 23 for $217,000 in cash.

Late in November, the parent issued stock for cash.

During the year, the subsidiary paid dividends of $25,000. Both parent and subsidiary pay dividends in the same year as declared.

Prepare a consolidated statement of cash flows for this business combination for the year ending December 31, 2018. (Use indirect method) (Negative amounts and amounts to be deducted should be indicated by a minus sign.)

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Answer #1

Consolidated statement of cash flow

Year ending december 31, 2018

(Indirect method)

cash flow fron operating activities: Consolidated net income $256000 Adjustment from acrual to cash Depreciation and amotization $126000 Gain on sale of building -33000 Decrease in account receivable 23000 Increase in inventory -153000 Decrease in accounts payable -39000 net cash flow from operating activities $180000 cash flow from investing activites: Sale of building(43000+33000) 76000 Purchase of equipment(given) -217000 net cash flow from investing activities -141000 cash flow from financing activities Dividends paid(113000+(25000×0.2)) -118000 Issuance of bonds 113000 Issuance of common stock (19000+40000) 59000 net cash flow from financing activities $54000 Net increase in cash during the year $93000 Cash january 1,2018 $93000 Cash december 31,2018 $186000
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