parento inc owns 80 of santana corp the consolidated financial statements of pa r en 737291
Parento Inc. owns 80% of Santana Corp. The consolidated financial statements of
Pa r ento follow:
|
PARENTO INC. CONSOLIDATED BALANCE SHEET at December 31, Year 4 |
||
|
Cash |
Year 4 $118,600 |
Year 3 $ 49,800 |
|
Accounts receivable |
115,000 |
126,000 |
|
Inventory |
232,000 |
192,000 |
|
Land |
86,000 |
114,000 |
|
Buildings and equipment |
598,000 |
510,000 |
|
Accumulated depreciation |
(205,000) |
(168,000) |
|
Databases |
16,800 |
19,200 |
|
|
$961,400 |
$843,000 |
|
Accounts payable |
$ 54,400 |
$ 31,200 |
|
Accrued liabilities |
7,200 |
27,000 |
|
Bonds payable |
320,000 |
240,000 |
|
Bond premium |
9,600 |
10,800 |
|
Common shares |
180,000 |
180,000 |
|
Retained earnings |
363,480 |
330,000 |
|
Non controlling interest |
26,720 |
24,000 |
|
|
$961,400 |
$843,000 |
|
PARENTO INC. CONSOLIDATED INCOME STATEMENT for the Year Ended December 31, Year 4 |
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|
Sales Cost of sales |
535,000 |
$960,000 |
|
Selling expense |
144,600 |
|
|
Administrative expense |
159,800 |
|
|
Interest expense |
31,400 |
|
|
Income tax |
37,000 |
907,800 |
|
Net income |
|
$ 52,200 |
|
Attributable to Parento’s shareholders |
|
$ 47,880 |
|
Non controlling interest |
|
4,320 |
Parento Inc. purchased its 80% interest in Santana Corp. on January 1, Year 2, for $114,000 when Santana had net assets of $90,000. The acquisition differential was allocated $24,000 to databases (10 year life), with the balance allocated to equipment (20 year life). Parento issued $80,000 in bonds on December 31, Year 4. Santana reported a net income of $24,000 for Year 4 and paid dividends of $8,000.
Selling and administrative expense includes the following:
|
Depreciation of buildings and equipment |
$37,000 |
|
Database amortization |
2,400 |
|
Loss on land sale |
2,000 |
Parento reported a Year 4 equity method income of $47,880 and paid divi dends of $14,400.
Required:
(a) Prepare a consolidated cash flow statement for Year 4.
(b) Why a r e 100% of the dividends paid by Santana not shown as a cash outflow on the cash flow statement?