PLASTER INC. WEEK 4

| June 12, 2016

Question
On June 30, 2011, Plaster, Inc., paid $916,000 for 80 percent of Stucco Company’s outstanding stock.

Plaster assessed the acquisition-date fair value of the 20 percent noncontrolling interest at $229,000.

At acquisition date, Stucco reported the following book values for its assets and liabilities:

Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 60,000

Accounts receivable . . . . . . . . . . . . . . . . 127,000

Inventory . . . . . . . . . . . . . . . . . . . . . . . . 203,000

Land . . . . . . . . . . . . . . . . . . . . . . . . . . . 65,000

Buildings . . . . . . . . . . . . . . . . . . . . . . . . 175,000

Equipment . . . . . . . . . . . . . . . . . . . . . . . 300,000

Accounts payable . . . . . . . . . . . . . . . . . (35,000)

LO3

LO On June 30, Plaster allocated the excess acquisition-date fair value over book value to Stucco’s

assets as follows:

Equipment (3-year life) . . . . . . . . . . . . . . $ 75,000

Database (10-year life) . . . . . . . . . . . . . . 175,000

At the end of 2011, the following comparative (2010 and 2011) balance sheets and consolidated income

statement were available:

Plaster, Inc. Consolidated

December 31, 2010 December 31, 2011

Cash . . . . . . . . . . . . . . . . . . . . . . . . . . $ 43,000 $ 242,850

Accounts receivable (net) . . . . . . . . . . . 362,000 485,400

Inventory . . . . . . . . . . . . . . . . . . . . . . . 415,000 720,000

Land . . . . . . . . . . . . . . . . . . . . . . . . . . 300,000 365,000

Buildings (net) . . . . . . . . . . . . . . . . . . . 245,000 370,000

Equipment (net) . . . . . . . . . . . . . . . . . 1,800,000 2,037,500

Database . . . . . . . . . . . . . . . . . . . . . . . –0– 166,250

Total assets . . . . . . . . . . . . . . . . . . . $3,165,000 $4,387,000

Accounts payable . . . . . . . . . . . . . . . . $ 80,000 $ 107,000

Long-term liabilities . . . . . . . . . . . . . . . 400,000 1,200,000

Common stock . . . . . . . . . . . . . . . . . . 1,800,000 1,800,000

Noncontrolling interest . . . . . . . . . . . . –0– 255,500

Retained earnings . . . . . . . . . . . . . . . . 885,000 1,024,500

Total liabilities and equities . . . . . . . . $3,165,000 $4,387,000

PLASTER, INC., AND SUBSIDIARY STUCCO COMPANY

Consolidated Income Statement

For the Year Ended December 31, 2011

Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,217,500

Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . $737,500

Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187,500

Database amortization . . . . . . . . . . . . . . . . . . . . . . 8,750

Interest and other expenses . . . . . . . . . . . . . . . . . . . 9,750 943,500

Consolidated net income . . . . . . . . . . . . . . . . . . . $ 274,000

Additional Information for 2011

•On December 1, Stucco paid a $40,000 dividend. During the year, Plaster paid $100,000 in

dividends.

•During the year, Plaster issued $800,000 in long-term debt at par.

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

Prepare a 2011 consolidated statement of cash flows for Plaster and Stucco. Use the indirect method

of reporting cash flows from operating activities.

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