Investor has a 40% ownership interest in the common stock of Investee. Investor

Question

Investor has a 40% ownership interest in the common stock of Investee. Investor paid $10,000 more than<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

book value for its 40% interest and regards the excess as attributable to goodwill. If Investee reports income

of $200,000 and pays dividends of $50,000, the operating activities of the consolidated statement of cash

flows (indirect method) will reflect an adjustment of

The answer is $60,000. Can you show me how this answer is calculated?

Explanation / Answer

Hi,

Please find the answer as follows:

= .40*(200000 - 50000) = 60000

Thanks.

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