Question

On June 30, 2018, Plaster, Inc., paid $908,000 for 80 percent of Stucco Company's outstanding stock. Plaster assessed the acquisition-date fair value of the 20 percent noncontrolling interest at $227,000. At acquisition date, Stucco reported the following book values for its assets and liabilities:

Cash	$	59,300
Accounts receivable		125,900
Inventory		201,600
Land		64,800
Buildings		174,300
Equipment		298,400
Accounts payable		(34,700	)

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)	$	74,000
Database (10-year remaining life)		171,400

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	$	41,700			$	235,500
Accounts receivable (net)		350,800				470,700
Inventory		402,500				697,800
Land		291,000				355,800
Buildings (net)		237,500				360,300
Equipment (net)		1,745,000				1,984,400
Database		0				162,830
Total assets	$	3,068,500			$	4,267,330
Accounts payable	$	78,000			$	104,300
Long-term liabilities		390,000				1,172,960
Common stock		1,755,000				1,755,000
Noncontrolling interest		0				249,000
Retained earnings		845,500				986,070
Total liabilities and equities	$	3,068,500			$	4,267,330

PLASTER, INC., AND SUBSIDIARY STUCCO COMPANY Consolidated Income Statement For the Year Ended December 31, 2018
Revenues				$	1,184,200
Cost of goods sold	$	717,100
Depreciation		181,900
Database amortization		8,570
Interest and other expenses		9,700			917,270
Consolidated net income				$	266,930

Additional Information for 2018

• On December 1, Stucco paid a $48,800 dividend. During the year, Plaster paid $92,000 in dividends.
• During the year, Plaster issued $782,960 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			$       266,930
Adjustment from accrual to cash:
Depreciation			$       181,900
Database Amortization			$            8,570
Decrease in accounts receivable	$125,900+$350,800-$470,700		$            6,000
Decrease in inventory	$201,600+$402,500-$697,800		$       (93,700)
Decrease in accounts payable	$104,300-$34,700-$78,000		$         (8,400)
Net cash flow from operating activities			$       361,300
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Sutco	$908,000 Purchase price-$59,300 Subs Cash balance	$   (848,700)
Net cash flow from investing activities			$     (848,700)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid	$92,000+$48,800*20%	$   (101,760)
Issuance of Long term debt		$     782,960
Net cash flow from financing activities			$       681,200
Net increase in cash during 2018			$       193,800
Cash, January 1, 2018	Only of Parent Company		$         41,700
Cash, December 31, 2018			$       235,500