accounting-Plaster assessed the acquisition-date fair value

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 . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 60,000Accounts receivable . . . . . . . . . . . . . . . . 127,000Inventory . . . . . . . . . . . . . . . . . . . . . . . . 203,000Land . . . . . . . . . . . . . . . . . . . . . . . . . . . 65,000Buildings . . . . . . . . . . . . . . . . . . . . . . . . 175,000Equipment . . . . . . . . . . . . . . . . . . . . . . . 300,000Accounts payable . . . . . . . . . . . . . . . . . (35,000)LO3LO On June 30, Plaster allocated the excess acquisition-date fair value over book value to Stucco’sassets as follows:Equipment (3-year life) . . . . . . . . . . . . . . $ 75,000Database (10-year life) . . . . . . . . . . . . . . 175,000At the end of 2011, the following comparative (2010 and 2011) balance sheets and consolidated incomestatement were available:Plaster, Inc. ConsolidatedDecember 31, 2010 December 31, 2011Cash . . . . . . . . . . . . . . . . . . . . . . . . . . $ 43,000 $ 242,850Accounts receivable (net) . . . . . . . . . . . 362,000 485,400Inventory . . . . . . . . . . . . . . . . . . . . . . . 415,000 720,000Land . . . . . . . . . . . . . . . . . . . . . . . . . . 300,000 365,000Buildings (net) . . . . . . . . . . . . . . . . . . . 245,000 370,000Equipment (net) . . . . . . . . . . . . . . . . . 1,800,000 2,037,500Database . . . . . . . . . . . . . . . . . . . . . . . –0– 166,250Total assets . . . . . . . . . . . . . . . . . . . $3,165,000 $4,387,000Accounts payable . . . . . . . . . . . . . . . . $ 80,000 $ 107,000Long-term liabilities . . . . . . . . . . . . . . . 400,000 1,200,000Common stock . . . . . . . . . . . . . . . . . . 1,800,000 1,800,000Noncontrolling interest . . . . . . . . . . . . –0– 255,500Retained earnings . . . . . . . . . . . . . . . . 885,000 1,024,500Total liabilities and equities . . . . . . . . $3,165,000 $4,387,000PLASTER, INC., AND SUBSIDIARY STUCCO COMPANYConsolidated Income StatementFor the Year Ended December 31, 2011Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,217,500Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . $737,500Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187,500Database amortization . . . . . . . . . . . . . . . . . . . . . . 8,750Interest and other expenses . . . . . . . . . . . . . . . . . . . 9,750 943,500Consolidated net income . . . . . . . . . . . . . . . . . . . $ 274,000Additional Information for 2011•On December 1, Stucco paid a $40,000 dividend. During the year, Plaster paid $100,000 individends.•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 methodof reporting cash flows from operating activities.

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