Advanced Accounting 11th Edition by Paul Fischer,William Tayler, Rita Cheng

Exercise 17

P Company acquires 80% of the common stock of S Company for an agreed-upon price of $640,000. The fair value of the NCI is $160,000. The book value of the net assets is $600,000, which includes $50,000 of subsidiary cash equivalents. Any excess is attributable to goodwill. (A D D schedule is suggested to properly calculate the NCI.) How will this transaction affect the cash flow statement of the consolidated firm in the period of the purchase, if:
a. P Company pays $640,000 cash to purchase the stock?
b. P Company pays $400,000 cash and signs 5-year notes for $240,000? 80% of the Company S shareholders receives notes.
c. P Company exchanges only common stock with 80% of the shareholders of Company S?