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Which of the following statements is true for a consolidated statement of cash flows? a:...

Question:

Which of the following statements is true for a consolidated statement of cash flows?

a: Parent's dividends and subsidiary's dividends are deducted as financing activity.

b: Neither parent's or subsidiary's dividends are deducted as financing activity.

c: Parent's dividends and its share of subsidiary's dividends are deducted as financing activity.

d: Only parent's dividends are deducted as a financing activity.

e: All parent's dividends are non-controlling interest of subsidiary's dividends are deducted as a financing activity.

Consolidated Cash Flow Statement:

Consolidated Cash Flow statement is an aggregate statement prepared by the parent company by considering the cash transactions from operating, investing and financing activities of its subsidiaries as well.

Answer and Explanation:

The Following statement is correct with respect to consolidated statement of cash flows:

E: All parent's dividends and non-controlling interests of the subsidiary's dividends are deducted as financing activities.

The reason for the above statement being true is that the parent dividends are meant for the outsiders but the non-controlling interests of the subsidiary company are only for interests for the subsidiary company, not the parent company. Therefore non-controlling interests of the subsidiary dividends are deducted from the parent dividends to arrive at the financing activities.


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Using the Statement of Cash Flows for Decision Making

from Accounting 101: Financial Accounting

Chapter 12 / Lesson 5
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