Parento Inc. owns 80% of Santana Corp. The consolidated financial statements of Parento follow:Parento Inc. purchased its 80% interest in Santana Corp. on January 1, Year 2, for $114,000 when Santana...

Parento Inc. owns 80% of Santana Corp. The consolidated financial statements of Parento follow: Parento Inc. purchased its 80% interest in Santana Corp. on January 1, Year 2, for $114,000 when Santana had net assets of $90,000. The acquisition differential was allocated $24,000 to databases (10-year life), with the balance allocated to equipment (20-year life). Parento issued $80,000 in bonds on December 31, Year 4. Santana reported a net income of $24,000 for Year 4 and paid dividends of $8,000. Selling and administrative expense includes the following: Depreciation of buildings and equipment……….$37,000 Database amortization……………… 2,400 Loss on land sale………………. 2,000 Parento reported a Year 4 equity method income of $47,880 and paid dividends of $14,400. Required: (a) Prepare a consolidated cash flow statement for Year 4. (b) Why are 100% of the dividends paid by Santana not shown as a cash outflow on the cash flow statement? View Solution:

Parento Inc owns 80 of Santana Corp The consolidated financial