On January 1, 2016, Beilich Enterprises bought 20% of the outstanding common sto
ID: 2559904 • Letter: O
Question
On January 1, 2016, Beilich Enterprises bought 20% of the outstanding common stock of Wolfe Construction Company for $750.0 million cash. Wolfe’s net income for the year ended December 31, 2016, was $375.0 million. During 2016, Wolfe declared and paid cash dividends of $75.0 million. Beilich recorded the investment as follows:
On January 1, 2016, Beilich Enterprises bought 20% of the outstanding common stock of Wolfe Construction Company for $750.0 million cash. Wolfe’s net income for the year ended December 31, 2016, was $375.0 million. During 2016, Wolfe declared and paid cash dividends of $75.0 million. Beilich recorded the investment as follows:
On January 1, 2016, Beich Enterprises bought 20% of the outstanding common stock of Wolfe Construction Company for $750.0 million cash. Wolfe's net income for the year ended December 31, 2016 was $375.0 million. During 2016, Wolfe declared and paid cash dividends of $75.0 million. Beilich recorded the investment as follows (S in millions) Purchase Investment in Wolfe Construction shares 750.0 Cash 750.0 Net income Investment in Wolfe Construction shares (20% $375.0 million) 75.0 Investment revenue 75.0 Dividends Cash (20% × $75.0 million) 15.0 Investment in Wolfe Construction shares 15.0 Required What would be the pretax amounts related to the investment that Beilich would report in its statement of cash flows for the year ended December 31, 2016? (Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5). Cash outflows should be indicated by a minus sign.) Operating activities Investing activities Financing activitiesExplanation / Answer
Pretax amounts that would be reported in cash flow statements is as shown below:
Operating activities: Cash of $15 million
Investing activities cash investment os $750 million
Financing activities deduction of $75 million
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