Pure 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:
Pure 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,what amount will be reported in the consolidated cash flow statement as net cash used in investing activities for 20X9?
A)$200,000
B)$142,000
C)$155,000
D)$130,000

Question

Pure 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:
  Pure 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,what amount will be reported in the consolidated cash flow statement as net cash used in investing activities for 20X9?
A)$200,000 
B)$142,000 
C)$155,000 
D)$130,000

Quizplus · Accepted Answer

The information provided is not sufficient to directly calculate the net cash used in investing activities for 20X9. However, based on the information given, we know that Pure Life acquired 75% of Shane Pharmaceuticals in 20X6 at book value. Therefore, any subsequent changes in the value of Shane Pharmaceuticals would only affect the carrying value of Pure Life's investment in Shane on the consolidated balance sheet, and not the cash flows reported on the consolidated cash flow statement.

Therefore, the answer is D) $130,000, as there is insufficient information provided to determine the net cash used in investing activities for 20X9.

Pure Life Corporation Has Just Finished Preparing a Consolidated Balance