b. Prepare a consolidated statement of cash flows for 20X3. (Amounts to be deducted should be indicated with a minus sign.) PROTECTO CORPORATION AND SUBSIDIARY Consolidated Statement of Cash Flows Year Ended December 31, 20X3 Cash Flows from Operating Activities Adjustments for noncash items: Changes in operating assets and liabilities Cash Flows from Investing Activities Cash Flows from Financing Activities: Dividends Paid: Cash balance at beginning of year Cash balance at end of year shares on January 1, 20x1, for $40,500 more than book value. At that date, the fair value of the noncontrolling interest was $15.500 more than 40 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 $64,000 and later in the year sold it to Protecto for $75,000. Protecto is still holding the land as an investment. During 20x3, Protecto- bonds with a value of $175,000 were exchanged for equipment valued at $175,000 On January 1, 20X3, Protecto held inventory purchased previously from Strand for $50,000. During 20x3, Protecto purchased an additional $106.000 of goods from Strand and held $64,000 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 $18,900, and on December 31, 20x3, it held goods it had purchased from Protecto for $8,400 during 20X3. Strand's total purchases from Protecto in 20X3 were $23.000. Protecto sells inventory to Strand at cost plus a 40 percent markup. The consolidated balance sheet at December 31, 20X2, contained the following amounts: 0 s D 300 The consolidation worksheet below was prepared on December 31, 20X3. All consolidation entries and adjustments have been entered properly in the worksheet. Protecto accounts for its investment in Strand using the fully adjusted equity method. PROTECTO CORPORATION AND STRAND COMPANY Consolidation Worksheet December 31, 20Xx3 Consolidation Entries Protecto Strand Corporation Company DR CR Consolidated Income Statement Sales $ 380,000 $ 741,000 S490,000 $106,000 23,000 Less: Cost of Goods Sold (375,000) $10,000 93,200 5,400 (260,000) (505,800) 20,600 (39,000) (68,000) (7,000) (84,000) Less: Depreciation Expense Less: Amortization Expense Less: Other Expense Income from Strand Co. Consolidated Net Income (29,000) 7,000 (36,000) (48,000) 27.120 $163,120 16.080 $179200 22.920 $ 62,920 4,200 $133,400 2.800 $136.200 0 $ 43,000 76,200 (13,280) NCI in Net Income of Strand Controlling Interest in Net Income Statement of Retained Earnings Beginning Balance Net Income $ 62,920 $ 43,000 62,920 $ 282,000 62,920 $282,000 62,920 185,000 43,000 (34,000) $ 194.000 $185,000 179,200 $136,200 Less: Dividends Declared Ending Balance (59.000) $ 285,920 34,000 (59.000) 285,920 $364.200 $170 200 Balance Sheet Assets $ 42,500 43,000 92.800 S30,200 S 72,700 Cash Accounts Receivable 91,000 134,000 130,000 $12.800 207,600 Inventory 2.400 35,000 0 Patent $ 35,000 6,600 6,000 5,400 Investment in Subsidiary 166,320 163.320 21.000 22.800 270,000 75,000 473,000 Land Buildings and Equipment Less: Accumulated Depreciation 11,000 86,800 674,000 (209,000) 69,000 (180,000) (98,000) 69,000 0 $785,520 $ 373,100 $122,000 $279,520 $1,001,100 Total Assets Liabilities & Equity Accounts Payable Bonds Payable Common Stock $113,700 $103,600 176,000 220,000 $10,100 93,000 76,000 269,000 $ 76,000 220,000 285,920 112,480 Retained Eamings NCI in NA of Strand 285,920 194,000 364,200 4400 $170,200 106,880 14,000 $291.080 4.000 $ 785,520 $ 373,100 $448,600 $1,001,100 Total Liabilities & Equity a. Prepare a worksheet for a consolidated statement of cash flows for 20X3 using the indirect method. (Values in the first two columns (the "parent" and "subsidiary" balances) that are to be deducted should be indicated with a minus sign, while all values in the "Consolidation Entries" columns should be entered as positive values. For accounts where multiple adjusting entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet.) PROTECTO CORPORATION AND SUBSIDIARY Consolidated Cash Flow Worksheet Year Ended December 31, 20X3 Consolidation Entries Balance 12/313 Balance tem Debil Credit 1/1000 Assets Cash Accounts receivable Inventory Land Buildings and equipment Less Accumulated depreciation Patents Total Assets Liabilities & Equity Accounts payable Bonds payable Common stock Retained eamings Noncontrolling interest Total Liabilities&Equity Cash Flows from Operating Activites Consolidated net income Amortization expense Depreciation expense Decrease in accounts receivable Increase in inventory Decrease in accounts payable Cash Flows from Investing Activibes Purchase of land Acquisition of buldings and equipment from bond issue Purchase of buildings and equipment Cash Flows from Financing Activities Dividends Paid To Protecto Corp shareholders To noncontrolling shareholders Issuance of bonds for buildings and equipment Decrease in cash b. Prepare a consolidated statement of cash flows for 20X3. (Amounts to be deducted should be indicated with a minus sign.) PROTECTO CORPORATION AND SUBSIDIARY Consolidated Statement of Cash Flows Year Ended December 31, 20X3 Cash Flows from Operating Activities Adjustments for noncash items: Changes in operating assets and liabilities Cash Flows from Investing Activities Cash Flows from Financing Activities: Dividends Paid: Cash balance at beginning of year Cash balance at end of year shares on January 1, 20x1, for $40,500 more than book value. At that date, the fair value of the noncontrolling interest was $15.500 more than 40 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 $64,000 and later in the year sold it to Protecto for $75,000. Protecto is still holding the land as an investment. During 20x3, Protecto- bonds with a value of $175,000 were exchanged for equipment valued at $175,000 On January 1, 20X3, Protecto held inventory purchased previously from Strand for $50,000. During 20x3, Protecto purchased an additional $106.000 of goods from Strand and held $64,000 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 $18,900, and on December 31, 20x3, it held goods it had purchased from Protecto for $8,400 during 20X3. Strand's total purchases from Protecto in 20X3 were $23.000. Protecto sells inventory to Strand at cost plus a 40 percent markup. The consolidated balance sheet at December 31, 20X2, contained the following amounts: 0 s D 300 The consolidation worksheet below was prepared on December 31, 20X3. All consolidation entries and adjustments have been entered properly in the worksheet. Protecto accounts for its investment in Strand using the fully adjusted equity method. PROTECTO CORPORATION AND STRAND COMPANY Consolidation Worksheet December 31, 20Xx3 Consolidation Entries Protecto Strand Corporation Company DR CR Consolidated Income Statement Sales $ 380,000 $ 741,000 S490,000 $106,000 23,000 Less: Cost of Goods Sold (375,000) $10,000 93,200 5,400 (260,000) (505,800) 20,600 (39,000) (68,000) (7,000) (84,000) Less: Depreciation Expense Less: Amortization Expense Less: Other Expense Income from Strand Co. Consolidated Net Income (29,000) 7,000 (36,000) (48,000) 27.120 $163,120 16.080 $179200 22.920 $ 62,920 4,200 $133,400 2.800 $136.200 0 $ 43,000 76,200 (13,280) NCI in Net Income of Strand Controlling Interest in Net Income Statement of Retained Earnings Beginning Balance Net Income $ 62,920 $ 43,000 62,920 $ 282,000 62,920 $282,000 62,920 185,000 43,000 (34,000) $ 194.000 $185,000 179,200 $136,200 Less: Dividends Declared Ending Balance (59.000) $ 285,920 34,000 (59.000) 285,920 $364.200 $170 200 Balance Sheet Assets $ 42,500 43,000 92.800 S30,200 S 72,700 Cash Accounts Receivable 91,000 134,000 130,000 $12.800 207,600 Inventory 2.400 35,000 0 Patent $ 35,000 6,600 6,000 5,400 Investment in Subsidiary 166,320 163.320 21.000 22.800 270,000 75,000 473,000 Land Buildings and Equipment Less: Accumulated Depreciation 11,000 86,800 674,000 (209,000) 69,000 (180,000) (98,000) 69,000 0 $785,520 $ 373,100 $122,000 $279,520 $1,001,100 Total Assets Liabilities & Equity Accounts Payable Bonds Payable Common Stock $113,700 $103,600 176,000 220,000 $10,100 93,000 76,000 269,000 $ 76,000 220,000 285,920 112,480 Retained Eamings NCI in NA of Strand 285,920 194,000 364,200 4400 $170,200 106,880 14,000 $291.080 4.000 $ 785,520 $ 373,100 $448,600 $1,001,100 Total Liabilities & Equity a. Prepare a worksheet for a consolidated statement of cash flows for 20X3 using the indirect method. (Values in the first two columns (the "parent" and "subsidiary" balances) that are to be deducted should be indicated with a minus sign, while all values in the "Consolidation Entries" columns should be entered as positive values. For accounts where multiple adjusting entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet.) PROTECTO CORPORATION AND SUBSIDIARY Consolidated Cash Flow Worksheet Year Ended December 31, 20X3 Consolidation Entries Balance 12/313 Balance tem Debil Credit 1/1000 Assets Cash Accounts receivable Inventory Land Buildings and equipment Less Accumulated depreciation Patents Total Assets Liabilities & Equity Accounts payable Bonds payable Common stock Retained eamings Noncontrolling interest Total Liabilities&Equity Cash Flows from Operating Activites Consolidated net income Amortization expense Depreciation expense Decrease in accounts receivable Increase in inventory Decrease in accounts payable Cash Flows from Investing Activibes Purchase of land Acquisition of buldings and equipment from bond issue Purchase of buildings and equipment Cash Flows from Financing Activities Dividends Paid To Protecto Corp shareholders To noncontrolling shareholders Issuance of bonds for buildings and equipment Decrease in cash