
Concept explainers
a
Consolidated statement of cash flow: consolidated entities, as with individual companies, must present a statement of cash flow when they issue a complete set of financial statements. A consolidated statement of
preparation of worksheet to develop consolidated cash flows for 20X3using direct method.
a

Answer to Problem 10.25P
Consolidated cash flows working paper shows balance of $1,025,000 and decrease in cash is $30,200.
Explanation of Solution
P Corporation and SCorporation
Consolidated cash flow work paper
Year ended December 31, 20X3
Balance $ 1/1/X3 | Debit | Credit | Balance $ 12/31/X3 | |
Cash | 92,000 | (a) 30,200 | 61,800 | |
Accounts receivable | 135,000 | (b) 15,000 | 120,000 | |
Inventory | 140,000 | (c) 59,000 | 199,000 | |
Land | 75,000 | (d) 5,000 | 80,000 | |
Building and equipment | 400,000 | (e) 100,000 | ||
(f) 40,000 | 540,000 | |||
Patients | 30,000 | (g) 5,000 | 25,000 | |
872,000 | 1,025,800 | |||
210,000 | (h) 40,000 | 250,000 | ||
Accounts payable | 114,200 | (i) 19,200 | 95,000 | |
Bonds payable | 90,000 | (j) 100,000 | 190,000 | |
Common stock | 100,000 | 100,000 | ||
273,000 | (k) 50,000 | (l) 79,400 | 302,400 | |
Non-controlling interest | 84,800 | (m) 8,000 | (l) 11,600 | 88,400 |
872,000 | 281,200 | 281,200 | 1,025,800 |
Amount $ | Amount $ | |
Cash flows from operating activities: | ||
Consolidated net income | (l) 91,000 | |
Amortization expenses | (g) 5,000 | |
Depreciation expenses | (h) 40,000 | |
Decrease in accounts receivable | (b) 15,000 | |
Increase in inventory | (c) 59,000 | |
Decrease in accounts payable | (i) 19,200 | |
Cash flows from investing activities: | ||
Purchase of land | (d) 5,000 | |
Acquisition of buildings and equipment from bond issue | (e) 100,000 | |
Purchase of buildings and equipment’s | (f) 40,000 | |
Cash flows from financing activities: | ||
Dividends paid to P corporation shareholders | (k) 50,000 | |
Dividends paid to non-controlling shareholders | (m) 8,000 | |
Issue of bonds for buildings and equipment’s | (j) 100,000 | |
Decrease in cash | (a) 30,200 | |
281,200 | 281,200 |
Explanation of work paper entries
- Decrease in cash
- Payment received from customers
- Increase in inventory
- purchase of land
- purchase of equipment
- purchase of equipment
- Impairment of patients
- Depreciation charges
- Decrease in accounts payable
- Issue of bonds
- Dividends to parent shareholders
- Controlling interest
- Dividends to non-controlling shareholders
b
Consolidated statement of cash flow: consolidated entities, as with individual companies, must present a statement of cash flow when they issue a complete set of financial statements. A consolidated statement of cash flows is similar to a statement of cash flows prepared for an individual corporate entity and is prepared in same manner. Consolidated statement of cash flow is prepared after consolidated financial statement. Consolidated cash flow statement is prepared form the information in the three consolidated statements, when an indirect approach is used consolidated net income must be adjusted for all items that affect consolidated net income and the cash of consolidated entity effectively.
preparation of consolidated statement of cash flows for 20X3 using direct method
b

Answer to Problem 10.25P
Decrease in cash for 20X3 as per consolidated statement of cash flows is $30,200
Explanation of Solution
P Corporation and S Corporation
Consolidated cash flow statement
Year ended December 31, 20X3
Amount $ | Amount $ | |
Cash flows from operating activities: | ||
Consolidated net income | 91,000 | |
Adjustment of non-cash expenses: | ||
40,000 | ||
Amortization expenses | 5,000 | |
Total adjustment non-cash expenses | 45,000 | |
Adjustment of operating assets and liabilities: | ||
Decrease in accounts receivable | 15,000 | |
Increase in inventory | (59,000) | |
Decrease in accounts payable | (19,200) | |
Total adjustment | (63,200) | |
Net cash from operating activities | 72,800 | |
Cash flows from investing activities: | ||
Purchase of land | (5,000) | |
Purchase of buildings and equipment’s | (40,000) | |
Net cash used in investing activities | (45,000) | |
Cash flows from financing activities: | ||
Dividends paid to P’s shareholders | (50,000) | |
Dividends paid to non-controlling shareholders | (8,000) | |
Net cash from financing activities | (58,000) | |
Net | (30,200) | |
Cash balance at the beginning of the year | 92,000 | |
Cash balance at the end of the year | 61,800 | |
Supplemental schedule of non-cash investing and financing activities: | ||
Issuance of bonds to purchase equipment | 100,000 |
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