Plateau Company acquires an 80% interest in Seagull Company for $200,000 cash on January 1, 20X1. On that date, Seagull's equipment is undervalued by $25,000; any excess of cost over book value is attributed to goodwill. Seagull's balance sheet on the date of the purchase is as follows:
The controlling interest in consolidated net income for 20X1 is $97,900; the noncontrolling interest is $6,000. During the year Plateau retired long-term debt by issuing common stock. Dividends declared and paid during the year by Plateau and Seagull were $30,000 and $15,000, respectively. During the year Seagull sold equipment with a book value of $30,000 for a gain of $3,000; there were no purchases of property, plant, or equipment during the year.
Required:
Prepare a statement of cash flows using the indirect method for Plateau Company and its subsidiary for the year ended December 31, 20X1.

Question

Plateau Company acquires an 80% interest in Seagull Company for $200,000 cash on January 1, 20X1. On that date, Seagull's equipment is undervalued by $25,000; any excess of cost over book value is attributed to goodwill. Seagull's balance sheet on the date of the purchase is as follows:  
The controlling interest in consolidated net income for 20X1 is $97,900; the noncontrolling interest is $6,000. During the year Plateau retired long-term debt by issuing common stock. Dividends declared and paid during the year by Plateau and Seagull were $30,000 and $15,000, respectively. During the year Seagull sold equipment with a book value of $30,000 for a gain of $3,000; there were no purchases of property, plant, or equipment during the year.  
Required:
Prepare a statement of cash flows using the indirect method for Plateau Company and its subsidiary for the year ended December 31, 20X1.

Quizplus · Accepted Answer

The Answer of Plateau Company acquires an 80% interest in Seagull Company for $200,000 cash on January 1, 20X1. On that date, Seagull's equipment is undervalued by $25,000; any excess of cost over book value is attributed to goodwill. Seagull's balance sheet on the date of the purchase is as follows:  
The controlling interest in consolidated net income for 20X1 is $97,900; the noncontrolling interest is $6,000. During the year Plateau retired long-term debt by issuing common stock. Dividends declared and paid during the year by Plateau and Seagull were $30,000 and $15,000, respectively. During the year Seagull sold equipment with a book value of $30,000 for a gain of $3,000; there were no purchases of property, plant, or equipment during the year.  
Required:
Prepare a statement of cash flows using the indirect method for Plateau Company and its subsidiary for the year ended December 31, 20X1.

Plateau Company Acquires an 80% Interest in Seagull Company for $200,000