New Life Corporation has just finished preparing a consolidated balance sheet, income statement, and statement of changes in retained earnings for 20X9. The following items are proposed for inclusion in the consolidated cash flow statement:
New Life holds 75 percent of the voting stock of Shane Pharmaceuticals, acquired at book value on June 21, 20X6. On the date of the acquisition, the fair value of the noncontrolling interest was equal to 25 percent of the book value of Shane.

-Based on the preceding information,assuming that New Life uses the direct method of computing cash flows from operating activities,what amount will be reported by the company as cash received from customers during the year?
A) $815,000
B) $785,000
C) $800,000
D) $835,000

Question

New Life Corporation has just finished preparing a consolidated balance sheet, income statement, and statement of changes in retained earnings for 20X9. The following items are proposed for inclusion in the consolidated cash flow statement:
New Life holds 75 percent of the voting stock of Shane Pharmaceuticals, acquired at book value on June 21, 20X6. On the date of the acquisition, the fair value of the noncontrolling interest was equal to 25 percent of the book value of Shane.
 
-Based on the preceding information,assuming that New Life uses the direct method of computing cash flows from operating activities,what amount will be reported by the company as cash received from customers during the year?
A) $815,000 
B) $785,000 
C) $800,000 
D) $835,000

Quizplus · Accepted Answer

The direct method calculates cash received from customers by adjusting sales revenue for changes in accounts receivable. If sales revenue is $800,000 and accounts receivable decreased by $15,000, then cash received from customers is $815,000.

New Life Corporation Has Just Finished Preparing a Consolidated Balance