REFERENCE: Ref.06_12
On January 1,2009,Harrison Corporation spent $2,600,000 to acquire control over Involved,Inc.This price was based on paying $750,000 for 30 percent of Involved's preferred stock,and $1,850,000 for 80 percent of its outstanding common stock.As of the date of the acquisition,Involved's stockholders' equity accounts were as follows:
-Johnson,Inc.owns control over Kaspar,Inc.Johnson reports sales of $400,000 during 2009 while Kaspar reports $250,000.Kaspar transferred inventory during 2009 to Johnson at a price of $50,000.On December 31,2009,30 percent of the transferred goods are still in Johnson's inventory.Consolidated accounts receivable on January 1,2009 was $120,000,and on December 31,2009 is $130,000.Johnson uses the direct approach in preparing the statement of cash flows.How much is cash collected from customers on the consolidated statement of cash flows?

Question

REFERENCE: Ref.06_12
On January 1,2009,Harrison Corporation spent $2,600,000 to acquire control over Involved,Inc.This price was based on paying $750,000 for 30 percent of Involved's preferred stock,and $1,850,000 for 80 percent of its outstanding common stock.As of the date of the acquisition,Involved's stockholders' equity accounts were as follows: 
-Johnson,Inc.owns control over Kaspar,Inc.Johnson reports sales of $400,000 during 2009 while Kaspar reports $250,000.Kaspar transferred inventory during 2009 to Johnson at a price of $50,000.On December 31,2009,30 percent of the transferred goods are still in Johnson's inventory.Consolidated accounts receivable on January 1,2009 was $120,000,and on December 31,2009 is $130,000.Johnson uses the direct approach in preparing the statement of cash flows.How much is cash collected from customers on the consolidated statement of cash flows?

Quizplus · Accepted Answer

Johnson's sales are $400,000 and Kaspar's sales are $250,000. The consolidated sales are $650,000. The consolidated accounts receivable increased by $10,000 during the year, from $120,000 to $130,000. This means that the consolidated cash collected from customers is $650,000 - $10,000 = $640,000. However, we need to add back the $50,000 of inventory that Kaspar transferred to Johnson, since this was already included in Johnson's sales. This gives us a total of $640,000 + $50,000 = $690,000. However, we need to subtract the $15,000 of inventory that Johnson still has on hand at the end of the year, since this has not yet been sold. This gives us a final answer of $690,000 - $15,000 = $675,000.

REFERENCE: Ref.06_12 On January 1,2009,Harrison Corporation Spent $2,600,000 to Acquire Control Over