Assignment: Rogers Company holds 80 percent of the common stock of Andrews, Inc., and 40 percent of this subsidiary's convertible bonds. The following consolidated financial statements are for 2004 and 2005:
Rogers Company and Consolidated Subsidiary
2004 2005
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 760,000 880,000
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . (510,000) (540,000)
Depreciation and amortization . . . . . . . . . . . . . . . . (90,000) (100,000)
Gain on sale of building . . . . . . . . . . . . . . . . . . . . . -0- 20,000
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . (30,000) (30,000)
Noncontrolling interest . . . . . . . . . . . . . . . . . . . . . (9,000) (11,000)
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 121,000 $ 219,000
Retained earnings, 1/1 . . . . . . . . . . . . . . . . . . . . . . $ 300,000 $ 371,000
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121,000 219,000
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . (50,000) (100,000)
Retained earnings, 12/31 . . . . . . . . . . . . . . . . . . . . $ 371,000 $ 490,000
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 80,000 $ 140,000
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . 150,000 140,000
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,000 340,000
Buildings and equipment (net) . . . . . . . . . . . . . . . . 640,000 690,000
Databases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,000 145,000
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,220,000 $1,455,000
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . $ 140,000 $ 100,000
Bonds payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 400,000 500,000
Noncontrolling interest in Andrews . . . . . . . . . . . . 32,000 41,000
Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000 120,000
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . 177,000 204,000
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . 371,000 490,000
Total liabilities and equities . . . . . . . . . . . . . . . . . . $1,220,000 $1,455,000
Additional Information
- Bonds were issued during 2005 by the parent for cash.
- Amortization of databases amounts to $5,000 per year.
- A building with a cost of $60,000 but a $30,000 book value was sold by the parent for cash on May 11, 2005.
- Equipment was purchased by the subsidiary on July 23, 2005, using cash.
- Late in November of 2005, the parent issued stock for cash.
- During 2005, the subsidiary paid dividends of $10,000.
Prepare a consolidated statement of cash flows for this business combination for the year ending December 31, 2005. Either the direct or the indirect approach may be used.