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On June 30, 2018, Plaster, Inc., paid $996,000 for 80 percent of Stucco Company's outstanding stock....

On June 30, 2018, Plaster, Inc., paid $996,000 for 80 percent of Stucco Company's outstanding stock. Plaster assessed the acquisition-date fair value of the 20 percent noncontrolling interest at $249,000. At acquisition date, Stucco reported the following book values for its assets and liabilities:

Cash $ 65,000
Accounts receivable 138,000
Inventory 221,000
Land 71,000
Buildings 191,000
Equipment 327,000
Accounts payable (38,000 )

On June 30, Plaster allocated the excess acquisition-date fair value over book value to Stucco's assets as follows:

Equipment (3-year remaining life) $ 81,000
Database (10-year remaining life) 189,000

At the end of 2018, the following comparative (2017 and 2018) balance sheets and consolidated income statement were available:

Plaster, Inc.
December 31, 2017		 Consolidated
December 31, 2018
Cash $ 46,000 $ 259,800
Accounts receivable (net) 387,000 519,300
Inventory 444,000 769,900
Land 321,000 392,000
Buildings (net) 262,000 397,000
Equipment (net) 1,925,000 2,186,500
Database 0 179,550
Total assets $ 3,385,000 $ 4,704,050
Accounts payable $ 86,000 $ 115,000
Long-term liabilities 430,000 1,368,400
Common stock 1,935,000 1,935,000
Noncontrolling interest 0 274,500
Retained earnings 934,000 1,011,150
Total liabilities and equities $ 3,385,000 $ 4,704,050
PLASTER, INC., AND SUBSIDIARY STUCCO COMPANY
Consolidated Income Statement
For the Year Ended December 31, 2018
Revenues $ 1,305,400
Cost of goods sold $ 790,500
Depreciation 200,500
Database amortization 9,450
Interest and other expenses 10,700 1,011,150
Consolidated net income $ 294,250


Additional Information for 2018

On December 1, Stucco paid a $48,000 dividend. During the year, Plaster paid $180,000 in dividends.

During the year, Plaster issued $938,400 in long-term debt at par.

Plaster reported no asset purchases or dispositions other than the acquisition of Stucco.

Prepare a 2018 consolidated statement of cash flows for Plaster and Stucco. Use the indirect method of reporting cash flows from operating activities. (Negative amounts and amounts to be deducted should be indicated by a minus sign.)

Solutions

Expert Solution

Cash Flow Statement :-

Particulars Amount($) Amount($)
Net Income 294250
Adjustments to conve rt net income to net cash flows from Operating Activities :-
Add : Depreciation Expense 200500
Add : Database Amortization 9450
Add : Decrease in Accounts Receivables (Working Note 1) 5700
Less : Increase in Inventory (Working Note 2) (104900)
Less : Decrease in Accounts Payables (Working Note 3) (9000) 101750
Net Cash Flow from Operating Activities 396000
Cash Flow from Investing Activities :-
Less : Cash Paid for Acquisition of Stucco (Working Note 4) (931000)
Net Cash Flow from Investing Activities (931000)
Cash Flow from Financing Activities :-
Issue of Debt 938400
Cash Dividends Paid (Working note 5) (189600)
Net Cash Flows from Financing Activities 748800
Increase in Cash 213800
Add : Beginning Cash Balance 46000
Ending Cash Balance 259800

Working Notes :-

1) Decrease in Accounts Receivables :-

= $519300-$387000-$138000

= - $5700

2) Increase in Inventories :-

= $769900-$444000-$221000

= $104900

3) Decrease in Accounts Payable :-

= $115000-$86000-$38000

= $9000

4) Cash Paid for Acquisition :-

= $996000 - $65000

= $931000

5) Cash Dividends Paid :-

= $180000 + ($48000*20%)

= $180000 + $9600

= $189600

ekkarill92 answered 1 year ago
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