Chapter 6, Problem 36P

Alford Company and its 80 percent–owned subsidiary, Knight, have the following income statements for 2018:

	Alford	Knight
Revenues	$(500,000)	$(230,000)
Cost of goods sold	300,000	140,000
Depreciation and amortization	40,000	10,000
Other expenses	20,000	20,000
Gain on sale of equipment	(30,000)	–0–
Equity in earnings of Knight	(36,200)	–0–
Net income	$(206,200)	$ (60,000)

Additional Information for 2018

• Intra-entity inventory transfers during the year amounted to $90,000. All intra-entity transfers were downstream from Alford to Knight.
• Intra-entity gross profits in inventory at January 1 were $6,000, but at December 31 they are $9,000.
• Annual excess amortization expense resulting from the acquisition is $11,000.
• Knight paid dividends totaling $20,000.
• •The noncontrolling interest’s share of the subsidiary’s income is $9,800.
• During the year, consolidated inventory rose by $11,000 while accounts receivable and accounts payable declined by $8,000 and $6,000, respectively.

  Using either the direct or indirect method, compute net cash flows from operating activities during the period for the business combination.