Company S has been an 80%-owned subsidiary of Company P since January 1, 2018 . The determination and distribution of excess schedule prepared at the time of purchase was as follows:

Entity 80% Parent 20% NCI
Entity FV $ 712,500 $ 570,000 $ 142,500
Book value:

Pain-in capital in excess of par 300,000

Retained earnings 1/1/20 300,000

Book value 600,000 480,000 120,000
Excess $ 112,500 $ 90,000 $ 22,500
Equipment $ 50,000 10 yr 5,000
Goodwill 62,500

Total $ 112,500

On January 2, 2019, Company P issued $120,000 of 8% bonds at face value to help finance the purchase of 25% of the outstanding common stock of Alpha Company for $200,000 . No excess resulted from this transaction. Alpha earned $100,000 net income during 2019 and paid $20,000 in dividends.

The only change in plant assets during 2019 was that Company S sold a machine for $10,000 . The machine had a cost of $60,000 and accumulated depreciation of $40,000 . Depreciation expense recorded during 2019 was as follows:

Company P Company S Alpha Company
Buildings $15,000 $ 8,000 $12,000
Machinery 35,000 20,000 4,000

The 2019 consolidated income was $180,000, of which the NCI was $10,000 . Company P paid dividends of $12,000, and Company S paid dividends of $10,000 .

Consolidated inventory was $287,000 in 2018 and $223,000 in 2019; consolidated current liabilities were $246,000 in 2018 and $216,700 in 2019 . Cash increased by $203,700 .

Required:

Using the indirect method and the information provided, prepare the 2019 consolidated statement of cash flows for Company P. and its subsidiary, Company S.

Company P and Subsidiary Company S
Consolidated Statement of Cash Flows
For the Year Ended December 31, 2019

Cash flows from operating activities:

Consolidated net income
$180,000
Adjustment to reconcile net income to net cash:

Building depreciation (1) 23,000

Machine depreciation (2) 60,000

Undistributed equity income from Alpha investment (3) (20,000)

Loss on sale of machinery (4) 10,000

Decrease in inventory (5) 64,000

Decrease in current liabilities (6) (29,300)

Total adjustments
107,700
Net cash flows provided by operating activities
$287,700

Cash flows from investing activities:

Payment for purchase of Alpha Company $(200,000)

Proceeds from sale of machine 10,000

Net cash flows used in investing activities
(190,000)

Cash flows from financing activities:

8% bond issuance $120,000

Dividends paid by Company P (12,000)

Dividends paid by Company S to unaffiliated owners (7) (2,000)

Net cash flows provided by financing activities
106,000
Net increase in cash
$203,700

(1) Building depreciation: $15,000 (P) + $8,000 (S)
(2) Machine depreciation: $35,000 (P) + $20,000 (S) + $5,000 (Amortization of excess)
(3) Undistributed equity income: It is assumed that Company P has an influential investment in Alpha to be accounted for by the equity method. Alpha had net income of $100,000 less dividends paid of $20,000 for a net $80,000 in retained income. P Company's share of this is 25% or $20,000 .
(4) The net book value of the machine sold was $20,000 ($60,000 - $40,000). The proceeds from the machine were $10,000 leaving a $10,000 .
(5) Decrease in inventory: $287,000 in 2018 - $223,000 in 2019 = $64,000 inflow
(6) Decrease in current liabilities: $246,000 in 2018 - $216,700 in 2019 = $29,300 outflow
(7) Dividends to unaffiliated owners of S: $10,000 x 20% = $2,000