Question

On June 30, 2018, Plaster, Inc., paid $868,000 for 80 percent of Stucco Company's outstanding stock. Plaster assessed the acquisition-date fair value of the 20 percent noncontrolling interest at $217,000. At acquisition date, Stucco reported the following book values for its assets and liabilities: Cash $ 56,800 Accounts receivable 120,400 Inventory 192,600 Land 61,800 Buildings 166,300 Equipment 284,900 Accounts payable (33,200 ) 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) $ 71,000 Database (10-year remaining life) 164,400 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 $ 40,200 $ 227,000 Accounts receivable (net) 338,300 453,700 Inventory 388,000 672,800 Land 280,500 342,300 Buildings (net) 229,000 346,800 Equipment (net) 1,682,500 1,909,900 Database 0 156,180 Total assets $ 2,958,500 $ 4,108,680 Accounts payable $ 75,000 $ 100,300 Long-term liabilities 375,000 1,089,620 Common stock 1,687,500 1,687,500 Noncontrolling interest 0 239,500 Retained earnings 821,000 991,760 Total liabilities and equities $ 2,958,500 $ 4,108,680 PLASTER, INC., AND SUBSIDIARY STUCCO COMPANY Consolidated Income Statement For the Year Ended December 31, 2018 Revenues $ 1,140,200 Cost of goods sold $ 690,600 Depreciation 175,400 Database amortization 8,220 Interest and other expenses 9,200 883,420 Consolidated net income $ 256,780 Additional Information for 2018 On December 1, Stucco paid a $49,600 dividend. During the year, Plaster paid $52,000 in dividends. During the year, Plaster issued $714,620 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.)

Answer 1

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CASH FROM OPERATING ACTIVTIES
Consolidated net income			$       256,780
Adjustment from accrual to cash:
Depreciation			$       175,400
Database Amortization			$            8,220
Decrease in accounts receivable	$120,400+$338,300-$453,700		$            5,000
Decrease in inventory	$192,600+$388,000-$672,800		$       (92,200)
Decrease in accounts payable	$100,300-$33,200-$75,000		$         (7,900)
Net cash flow from operating activities			$       345,300
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Sutco	$868,000 Purchase price-$56,800 Subs Cash balance	$   (811,200)
Net cash flow from investing activities			$     (811,200)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid	$52,000+$49,600*20%	$     (61,920)
Issuance of Long term debt		$     714,620
Net cash flow from financing activities			$       652,700
Net increase in cash during 2018			$       186,800
Cash, January 1, 2018	Only of Parent Company		$         40,200
Cash, December 31, 2018			$       227,000	$                 -