Goehring, Inc. owns 70 percent of Harry Corp. The consolidated income statement

Question

Goehring, Inc. owns 70 percent of Harry Corp. The consolidated income statement for a year reports $40,000 Noncontrolling Interest in Harry Corp.'s Net Income. Harry paid dividends in the amount of $100,000 for the year. What are the effects of these transactions in the consolidated statement of cash flows for the year?

No effects.

Increase in the operating section of $70,000.

Increase in the financing section of $70,000, and decrease in the operating section of $30,000.

Increase in the operating section of $70,000, and decrease in the financing section of $30,000.

Decrease in the financing section of $30,000.

No effects.

Increase in the operating section of $70,000.

Increase in the financing section of $70,000, and decrease in the operating section of $30,000.

Increase in the operating section of $70,000, and decrease in the financing section of $30,000.

Decrease in the financing section of $30,000.

Explanation / Answer

Answer: B Decrease in the financing section of $30,000

Whenever the subsidiary company paid dividend to the parent company then the parent company decreases its investment in the subsidiary by the Dividend amount. Goehring co. Owns 70% of Hary corp. So Hary corp. Is subsidiary of Goehring.

Gorhring inc. have reported $40,000 in the consolidated income statement and it earned $70,000 (100,000*70%) in didivends so the remaining$30,000(70,000 - 40,000) will be deducted in the Financing section in Cash flow

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