Chapter 10, Problem 10.1Q

To determine

Consolidated statement of cash flow:All the consolidated entities, must present statement of cash flow when they issue a complete set of financial statements. A consolidated statement of cash flow is similar to statement of cash flow presented by an individual entity and is prepared in similar manner.

It is prepared after the preparation of income statement, retained earnings statement and balance sheet. The consolidated cash flow statement is prepared from the information in the consolidated financial statements.

Why a simple fourth part consolidation worksheet is not prepared for consolidation cash flow statement.

Answer to Problem 10.1Q

Fourth part consolidation worksheet cannot be used because beginning and ending consolidated balance sheet totals are needed to determine cash flow for the period.

Explanation of Solution

The balance sheet, income statement and statement of changes in retained earnings are an integrated set and generally needed to be completed as a unit. Once completed these statements can then be sued to prepare the consolidated cash flow statement. Because both the beginning and ending consolidated balance sheet totals are needed to determine the cash flow for a period, the cash flow statement cannot be easily incorporated into the existing three part consolidated worksheet.