a. Prepare a worksheet for a consolidated statement of cash flows for 20X3 using the indirect method.

b. Prepare a consolidated statement of cash flows for 20X3.

Protecto Corporation purchased 75 percent of Strand Company's outstanding shares on January 1, 20X1, for $36,000 more than book value. At that date, the fair value of the noncontrolling interest was $16,000 more than 25 percent of Strand's book value. The full amount of the differential is considered related to patents and is being amortized over an eight-year period. In 20X1, Strand purchased a piece of land for $58,000 and later in the year sold it to Protecto for $83,000. Protecto is still holding the land as an investment. During 20X3, Protecto bonds with a value of $160,000 were exchanged for equipment valued at $160,000. On January 1, 20X3, Protecto held inventory purchased previously from Strand for $48,500. During 20X3, Protecto purchased an additional $103,000 of goods from Strand and held $59,500 of this inventory on December 31, 20X3. Strand sells merchandise to the parent at cost plus a 25 percent markup. Strand also purchases inventory items from Protecto. On January 1, 20X3, Strand held inventory it had previously purchased from Protecto for $16,200, and on December 31, 20X3, it held goods it had purchased from Protecto for $8,100 during 20X3. Strand's total purchases from Protecto in 20X3 were $20,000. Protecto sells inventory to Strand at cost plus a 35 percent markup. The consolidated balance sheet at December 31, 20X2, contained the following amounts: Credit $ Debit 96,000 170,000 154,000 77,000 470,000 39,000 Cash Accounts Receivable Inventory Land Buildings and Equipment Patents Accumulated Depreciation Accounts Payable Bonds Payable Noncontrolling Interest Common Stock Retained Earnings Totals $ 207,000 168,925 100,000 61,075 190,000 279,000 $1,806,000 $1,006,000 PROTECTO CORPORATION AND STRAND COMPANY Consolidation Worksheet December 31, 20X3 Consolidation Entries Protecto Corporation Strand Company DR Consolidated Income Statement Sales $ 460,000 $ 350,000 $ 687,000 $ 103,000 20,000 Less: Cost of Goods Sold (360,000) (230,000) $ (467,100) 9,700 91,100 4,200 17,900 (36,000) (26,000) 6,500 (62,000) (6,500) (81,300) (45,000) (36,300) 32,325 $ 60,025 Less: Depreciation Expense Less: Amortization Expense Less: Other Expense Income from Strand Co. Consolidated Net Income NCI in Net Income of Strand Controlling Interest in Net Income Statement of Retained Earnings Beginning Balance Net Income Less: Dividends Declared Ending Balance $ 49,000 $ 49,000 37,200 $ 166,700 11,700 $ 178,400 4,875 $127,775 1,625 $129,400 $ 70,100 (10,075) $ 60,025 $ 60,025 $170,000 178,400 $ 279,000 60,025 (56,000) $ 283,025 $ 170,000 49,000 (31,000) $ 188,000 $129,400 31,000 $160,400 $ 279,000 60,025 (56,000) $ 283,025 $348,400 Balance Sheet Assets Cash Accounts Receivable Inventory $ $ $ 29,600 88,000 127,000 41,000 42,400 92,200 70,600 130,400 205, 200 $ 11,900 2,100 32,500 Patent Investment in Subsidiary 188,100 $ 32,500 18,750 7,275 4,200 193,950 24,375 Land Buildings and Equipment Less: Accumulated Depreciation 82,000 437,000 (177,000) 22,200 255,000 (92,000) 25,000 66,000 79,200 626,000 (203,000) 66,000 Total Assets $ 774,700 $ 360,800 $128,725 $323,325 $ 940,900 $ Liabilities & Equity Accounts Payable Bonds Payable Common Stock Retained Earnings NCI in NA of Strand $ 131,675 170,000 190,000 283,025 12,800 90,000 70,000 188,000 $ 70,000 348,400 6,250 2,425 $427,075 $ 144,475 260,000 190,000 283,025 63,400 $160,400 63,950 8,125 $ 232,475 Total Liabilities & Equity $ 774,700 $ 360,800 $ 940,900