Please see the text for the balance sheets and income statements for both P Company and S Company. Due to the length of this case, we have not repeated them here.
a. Show separate SCFs for P and S for the year 2006 (for S it will be from July 1, 2006 to December 31, 2006) using the indirect method.
b. Show a consolidated SCF for 2006 (from January 1, 2006 to December 31, 2006).
Hint: Your cash flow will not show the correct cash increase for 2006.
c. Where does the discrepancy in b. lie and what is it an example of? How might the situation be remedied?
d. In b., show how you think the SCF would be done in actual practice.