Think like a real problem solver and explain me logic for:
Bolero Company holds
8
0
percent of the common stock of Rivera, Incorporated, and
3
0
percent of this subsidiary
’
s convertible bonds.

Question

Think like a real problem solver and explain me logic for:
Bolero Company holds 
8
0
 ﻿percent of the common stock of Rivera, Incorporated, and 
3
0
 ﻿percent of this subsidiary
’
s convertible bonds. The following consolidated financial statements are for 
2
0
2
3
 ﻿and 
2
0
2
4
 
(
credit balances indicated by parentheses
)
: Bolero Company and Consolidated Subsidiary RiveraAccounts
2
0
2
3
2
0
2
4
Revenues$ 
(
9
1
5
,
0
0
0
)
$ 
(
1
,
0
4
5
,
0
0
0
)
Cost of goods sold
6
1
3
,
0
0
0
6
5
3
,
0
0
0
Depreciation and amortization
1
0
3
,
0
0
0
1
2
6
,
0
0
0
Gain on sale of building
0
(
3
3
,
0
0
0
)
Interest expense
4
3
,
0
0
0
4
3
,
0
0
0
Consolidated net income
(
1
5
6
,
0
0
0
)
(
2
5
6
,
0
0
0
)
to noncontrolling interest
2
2
,
0
0
0
2
4
,
0
0
0
to parent company$ 
(
1
3
4
,
0
0
0
)
$ 
(
2
3
2
,
0
0
0
)
Retained earnings, 
1
/
1
$ 
(
3
1
3
,
0
0
0
)
$ 
(
3
8
4
,
0
0
0
)
Net income
(
1
3
4
,
0
0
0
)
(
2
3
2
,
0
0
0
)
Dividends declared
6
3
,
0
0
0
1
1
3
,
0
0
0
Retained earnings, 
1
2
/
3
1
$ 
(
3
8
4
,
0
0
0
)
$ 
(
5
0
3
,
0
0
0
)
Cash$ 
9
3
,
0
0
0
$ 
1
8
6
,
0
0
0
Accounts receivable
1
7
6
,
0
0
0
1
5
3
,
0
0
0
Inventory
2
1
3
,
0
0
0
3
6
6
,
0
0
0
Buildings and equipment 
(
ne

VIPSolutions · Accepted Answer

# Consolidated Statement of Cash Flows (2024)
## Year ending December 31, 2024

---

## Step 1: Determine Operating Cash Flows (Indirect Method)

### 1. Start with Net Income
- **Consolidated net income:** $\$ (256,000)$

### 2. Adjust for Non-Cash Items
- **Depreciation and amortization:** $\$126,000$
- **Amortization of databases:** $\$18,000$

### 3. Adjust for Gains/Losses
- **Gain on sale of building:** $\$ (33,000)$ (subtract gain)

### 4. Changes in Working Capital
- **Accounts receivable:** $\$ (153,000 - 176,000) = \$23,000$ decrease (cash inflow)
- **Inventory:** $\$ (366,000 - 213,000) = \$153,000$ decrease (cash inflow)
- **Accounts payable:** $\$ (116,000 - 155,000) = \$39,000$ decrease (cash outflow)

---

## Step 2: Calculate Operating Cash Flows
$$
\begin{aligned}
\text{Net Income} & = -\$256,000 \
\text{Plus: Depreciation} & = +\$126,000 \
\text{Plus: Database amortization} & = +\$18,000 \
\text{Less: Gain on sale} & = -\$33,000 \
\text{Adjustments for working capital:} \
\text{Accounts receivable} & = -\$23,000 \
\text{Inventory} & = -\$153,000 \
\text{Accounts payable} & = -\$39,000 \
\hline
\textbf{Net cash from operating activities} & = \boxed{\$ -260,000}
\end{aligned}
$$

---

## Step 3: Investing Activities

### a. Sale of Building
- **Book value:** \$43,000
- **Sale proceeds:** Cash received (assumed to be fair market value), actual sale price not explicitly given, but based on change in building account, assume sale proceeds = \$43,000.

### b. Purchase of Equipment
- **Cash paid:** \$217,000

### c. Sale of building and equipment proceeds are included
$$
\text{Net cash used in investing activities} = -\$217,000 + \text{cash from sale} \quad (\text{assumed } \$43,000)
$$
$$
= -\$174,000
$$

---

## Step 4: Financing Activities

### a. Issuance of Bonds
- **Parent issued bonds for cash:** amount not specified, but assuming an increase in bonds payable, and cash inflow.
  
### b. Sale of stock
- **Parent issued stock for cash:** amount not specified explicitly, but indicated in the data.

### c. Dividends paid
- **Dividends paid by parent and subsidiary:** total $\$25,000$

$$
\text{Net cash used in financing activities} \approx \text{(bonds issuance + stock issuance)} - \$25,000
$$
*(Exact amounts depend on issuance details; use available data for precise calculation)*

---

## **Summary of Cash Flows for 2024**

| **Activity** | **Amount** |
|---|---|
| **Operating activities** | $\boxed{-\$260,000}$ |
| **Investing activities** | $\boxed{-\$174,000}$ |
| **Financing activities** | \text{(net inflow/outflow depends on bond and stock issuance)} |

---

# Notes:
- The exact cash flows from bonds issued and stock issued are not specified but should be added based on the actual amounts.
- The calculations are based on available data and assumptions where data is incomplete.
- The indirect method primarily adjusts net income for non-cash items and changes in working capital.

---

**This provides a structured approach to solving the problem, focusing on the logic and steps involved in preparing a consolidated statement of cash flows.**

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