Alford Company and its 80 percent-owned subsidiary, Knight, have the following income statements for 2021: Alford $ (500,000) 300,000 40,000 20,000 (30,000) (36,200) $ (206,200) Revenues Cost of goods sold Depreciation and amortization Other expenses Gain on sale of equipment Equity in earnings of Knight Net income Knight $ (230,000) 140,000 10,000 20,000 0 0 $ (60,000)
Alford Company and its 80 percent-owned subsidiary, Knight, have the following income statements for 2021: Alford $ (500,000) 300,000 40,000 20,000 (30,000) (36,200) $ (206,200) Revenues Cost of goods sold Depreciation and amortization Other expenses Gain on sale of equipment Equity in earnings of Knight Net income Knight $ (230,000) 140,000 10,000 20,000 0 0 $ (60,000)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
![Alford Company and its 80 percent-owned subsidiary, Knight, have the following income statements for 2021:
Knight
$ (230,000)
Alford
$ (500,000)
300,000
40,000
140,000
10,000
20,000
20,000
(30,000)
(36,200)
$ (206, 200)
Revenues
Cost of goods sold
Depreciation and amortization
Other expenses
Gain on sale of equipment
Equity in earnings of Knight
Net income
0
0
$ (60,000)
Additional Information for 2021
• Intra-entity inventory transfers during the year amounted to $90,000. All intra-entity transfers were downstream from Alford to
Knight.
• Intra-entity gross profits in inventory at January 1 were $6,000, but at December 31, they are $9,000.
• Annual excess amortization expense resulting from the acquisition is $11,000.
• Knight paid dividends totaling $20,000.
• The noncontrolling interest's share of the subsidiary's income is $9,800.
. During the year, consolidated inventory rose by $11,000 while accounts receivable and accounts payable declined by $8,000 and
$6,000, respectively.
Net cash flows from operating activities
Using either the direct or indirect method, compute net cash flows from operating activities during the period for the business
combination.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fa7b5ab0c-fcb5-4d8a-bec8-1073a00e1825%2Fb29bdbe2-7c6d-4151-ada3-692b1b649cb2%2Fkvkz79p_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Alford Company and its 80 percent-owned subsidiary, Knight, have the following income statements for 2021:
Knight
$ (230,000)
Alford
$ (500,000)
300,000
40,000
140,000
10,000
20,000
20,000
(30,000)
(36,200)
$ (206, 200)
Revenues
Cost of goods sold
Depreciation and amortization
Other expenses
Gain on sale of equipment
Equity in earnings of Knight
Net income
0
0
$ (60,000)
Additional Information for 2021
• Intra-entity inventory transfers during the year amounted to $90,000. All intra-entity transfers were downstream from Alford to
Knight.
• Intra-entity gross profits in inventory at January 1 were $6,000, but at December 31, they are $9,000.
• Annual excess amortization expense resulting from the acquisition is $11,000.
• Knight paid dividends totaling $20,000.
• The noncontrolling interest's share of the subsidiary's income is $9,800.
. During the year, consolidated inventory rose by $11,000 while accounts receivable and accounts payable declined by $8,000 and
$6,000, respectively.
Net cash flows from operating activities
Using either the direct or indirect method, compute net cash flows from operating activities during the period for the business
combination.
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