Question

Penrose Corporation acquired 80% of the voting stock of Speedy Company several years ago. There were no revaluations of Speedy's identifiable net assets, and the excess of acquisition cost over Speedy's book value was attributed entirely to goodwill.

Some information for 2021:

1. Consolidated depreciation expense was $400, and the goodwill impairment loss was $30.
2. Plant assets with an original cost of $300 were sold for $20.
3. Penrose declared and paid $50 in cash dividends.
4. Speedy declared and paid $10 in cash dividends.

On the consolidated statement of cash flows for 2021, total cash dividends paid is:

A) $50
B) $52
C) $10
D) $40

Answer 1

A) $50

Step-by-step explanation:

The total dividend paid that is reported in the consolidated statement of cash flows is $50.

The cash dividend of $50 which is paid by Penrose will be reported in the consolidated statement of cash flows for the year 2021. The dividend of parent company Penrose is reported in the consolidated statement of cash flows and subsidiary company Speedy dividend is not reported in the consolidated statement of cash flows because these are considered as internal transfers of cash therefore are not reported.