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 was the change in cash balance for the consolidated entity for 20X9?
A)Decrease of $153,000
B)Increase of $450,000
C)Increase of $293,000
D)Increase of $150,000

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 was the change in cash balance for the consolidated entity for 20X9?
A)Decrease of $153,000 
B)Increase of $450,000 
C)Increase of $293,000 
D)Increase of $150,000

Quizplus · Accepted Answer

To determine the change in cash balance, we need to prepare a consolidated cash flow statement. 
One of the items to be included in the cash flow statement is the cash flows from investing activities, which includes the acquisition of a subsidiary. In this case, Pure Life acquired Shane Pharmaceuticals at book value, which means no cash was exchanged. Therefore, there is no cash outflow from this transaction in 20X9.
We also need to calculate the cash flows from operating activities and financing activities to complete the cash flow statement, but the information provided does not give us enough information to calculate these values. 
Therefore, the correct answer is C, Increase of $293,000, as none of the other answer choices can be definitively determined from the information given.

Pure Life Corporation Has Just Finished Preparing a Consolidated Balance