On June 30, 2018, Plaster, Inc., paid $996,000 for 80 percent of Stucco Company\

Question

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:

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

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

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.)

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

Explanation / Answer

Cash Flow Statement :-

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

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

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