Protecto Corporation purchased 60 percent of Strand Company's outstanding shares on January 1, 20X1, for $27,000 more than book value. At that date, the fair value of the noncontrolling interest was $17,000 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 $70,000 and later in the year sold it to Protecto for $84,000. Protecto is still holding the land as an investment During 20X3, Protecto bonds with a value of $190,000 were exchanged for equipment valued at $190,000. On January 1, 20X3, Protecto helld inventory purchased previously from Strand for $51,500. During 20x3, Protecto purchased an additional $109,000 of goods from Strand and held $68,500 of this inventory on December 31, 20x3. Strand sells merchandise to the parent at cost plus a 25 percent markup Strand also prchases inventory items from Protecto. On January 1, 20X3, Strand held inventory it had previously purchased from Protecto for $21,000, 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 $26,000. Protecto sells inventory to Strand at cost plus a 40 percent markup. The consolidated balance sheet at December 31, 20X2, contained the following amounts: Debit Credit Cash 102,000 200,000 151,500 83,000 Accounts Receivable Inventory Land Buildings and 530,000 Equipment 33,000 Patents Accumulated 200,000 S Depreciation Accounts Payable Bonds Payable Noncontrolling Interest Common Stock Retained Earnings 160,220 88,000 116,280 250,000 285,000 $1,099,500 $1,099,500 Totals The consolidatlon worksheet below was prepared on December 31, 20X3. All consolidation entrles 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, 20x3 Consolidation Entries Protecto Strand Corporation Company DR. CR Consolidated Income Statement 410,000 Sales 520,000 $109,000 795,000 26,000 Less Cost of Goods Sold (544,800) (390,000) (290,000) 10,300 95,300 6. 23,600 Less: Depreciation Expense Less Amortization Expense Less: Other Expense Income from Strand Co (42,000) (32,000) (74,000) 5, 500 (5,500) (35,700) 20,460 72,760 (51,000) (86,700) 23,760 3,300 0 $164,260 13,440 Consolidated Net Income 37,000 $138,500 2,200 84,000 (11,240) NCI in Net Income of Strand Controlling Interest in Net ncome 72,760 S 37,000 $177,700 $140,700 72,760 Statement of Retained Earninga Beginning Balance 285,000 72,760 (62,000) 295,760 200,000 37,000 (37,000) 200,000 $200,000 177,700 285,000 $140,700 37,000 $177,700 72,760 (62,000) 295,760 Net Income Less: Dividends Declared $377,700 Ending Balance Balance Sheet Asseta Cash 30,800 94,000 133,000 44,000 74,800 137,600 210,300 Accounts Receivable 43,600 13,700 2,400 Inventory 93, 400 Patent 27,500 27,500 Investment in Subsidiary 166,680 8,400 6,180 6,000 170,760 0 16,500 87,400 722,000 Land 78,000 504,000 23,400 290,000 14,000 Buildings and Equipment 72,000 Less: Accumulated (170,000) 72,000 (104,000) (202,000) Depreciation 0 836, 480 $390,400 $120,080 $289,360 1,057, 600 al Asset Liabilities & Equity 12,400 96,000 82,000 200,000 Accounts Payable Bonds Payable 108,720 121,120 278,000 250,000 182,000 250,000 82,000 Common Stock Retained EarningS $177,700 295,760 377,700 295,760 5,600 4,120 NCI in NA of Strand 111,440 112,720 11,000 Total Liabilities & Equity 836, 480 390,400 $469, 420 $300,140 $1,057, 600 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 "Consolldation 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 deblt 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 Works heet Year Ended December 31, 20X3 Consolidation Entries Balance Balance Item Debit Credit 1/1/X3 12/31/X3 Assets Cash Accounts receivable Inventory Land C Buildings and equipment Less: Accumulated depreciation C Patents S 0 0 Total Assets Liabilities & Equity Accounts payable Bonds payable Common stock Retained eamings Noncontrolling interest Total Liabilities & Equity S Cash Flows from Operating Activities: Consolidated net income Amortization expense Depreciation expense Decrease in accounts receivable Increase in inventory Decrease in accounts payable Cash Flows from Investing Activities Purchase of Iand Acquisition of buildings 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 0 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 0 Cash Flows from Investing Activities 0 Cash Flows from Financing Activities: Dividends Paid: 0 S 0 Cash balance at beginning of year Cash balance at end of year 0 - Protecto Corporation purchased 60 percent of Strand Company's outstanding shares on January 1, 20X1, for $27,000 more than book value. At that date, the fair value of the noncontrolling interest was $17,000 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 $70,000 and later in the year sold it to Protecto for $84,000. Protecto is still holding the land as an investment During 20X3, Protecto bonds with a value of $190,000 were exchanged for equipment valued at $190,000. On January 1, 20X3, Protecto helld inventory purchased previously from Strand for $51,500. During 20x3, Protecto purchased an additional $109,000 of goods from Strand and held $68,500 of this inventory on December 31, 20x3. Strand sells merchandise to the parent at cost plus a 25 percent markup Strand also prchases inventory items from Protecto. On January 1, 20X3, Strand held inventory it had previously purchased from Protecto for $21,000, 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 $26,000. Protecto sells inventory to Strand at cost plus a 40 percent markup. The consolidated balance sheet at December 31, 20X2, contained the following amounts: Debit Credit Cash 102,000 200,000 151,500 83,000 Accounts Receivable Inventory Land Buildings and 530,000 Equipment 33,000 Patents Accumulated 200,000 S Depreciation Accounts Payable Bonds Payable Noncontrolling Interest Common Stock Retained Earnings 160,220 88,000 116,280 250,000 285,000 $1,099,500 $1,099,500 Totals The consolidatlon worksheet below was prepared on December 31, 20X3. All consolidation entrles 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, 20x3 Consolidation Entries Protecto Strand Corporation Company DR. CR Consolidated Income Statement 410,000 Sales 520,000 $109,000 795,000 26,000 Less Cost of Goods Sold (544,800) (390,000) (290,000) 10,300 95,300 6. 23,600 Less: Depreciation Expense Less Amortization Expense Less: Other Expense Income from Strand Co (42,000) (32,000) (74,000) 5, 500 (5,500) (35,700) 20,460 72,760 (51,000) (86,700) 23,760 3,300 0 $164,260 13,440 Consolidated Net Income 37,000 $138,500 2,200 84,000 (11,240) NCI in Net Income of Strand Controlling Interest in Net ncome 72,760 S 37,000 $177,700 $140,700 72,760 Statement of Retained Earninga Beginning Balance 285,000 72,760 (62,000) 295,760 200,000 37,000 (37,000) 200,000 $200,000 177,700 285,000 $140,700 37,000 $177,700 72,760 (62,000) 295,760 Net Income Less: Dividends Declared $377,700 Ending Balance Balance Sheet Asseta Cash 30,800 94,000 133,000 44,000 74,800 137,600 210,300 Accounts Receivable 43,600 13,700 2,400 Inventory 93, 400 Patent 27,500 27,500 Investment in Subsidiary 166,680 8,400 6,180 6,000 170,760 0 16,500 87,400 722,000 Land 78,000 504,000 23,400 290,000 14,000 Buildings and Equipment 72,000 Less: Accumulated (170,000) 72,000 (104,000) (202,000) Depreciation 0 836, 480 $390,400 $120,080 $289,360 1,057, 600 al Asset Liabilities & Equity 12,400 96,000 82,000 200,000 Accounts Payable Bonds Payable 108,720 121,120 278,000 250,000 182,000 250,000 82,000 Common Stock Retained EarningS $177,700 295,760 377,700 295,760 5,600 4,120 NCI in NA of Strand 111,440 112,720 11,000 Total Liabilities & Equity 836, 480 390,400 $469, 420 $300,140 $1,057, 600 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 "Consolldation 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 deblt 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 Works heet Year Ended December 31, 20X3 Consolidation Entries Balance Balance Item Debit Credit 1/1/X3 12/31/X3 Assets Cash Accounts receivable Inventory Land C Buildings and equipment Less: Accumulated depreciation C Patents S 0 0 Total Assets Liabilities & Equity Accounts payable Bonds payable Common stock Retained eamings Noncontrolling interest Total Liabilities & Equity S Cash Flows from Operating Activities: Consolidated net income Amortization expense Depreciation expense Decrease in accounts receivable Increase in inventory Decrease in accounts payable Cash Flows from Investing Activities Purchase of Iand Acquisition of buildings 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 0 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 0 Cash Flows from Investing Activities 0 Cash Flows from Financing Activities: Dividends Paid: 0 S 0 Cash balance at beginning of year Cash balance at end of year 0