Protecto Corporation purchased 60 percent of Strand Companys outstanding shares on January 1, 20X1, for $31,100 more than book value. At that date, the fair value of the noncontrolling interest was $16,900 more than 40 percent of Strands 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 $54,000 and later in the year sold it to Protecto for $77,000. Protecto is still holding the land as an investment. During 20X3, Protecto bonds with a value of $150,000 were exchanged for equipment valued at $150,000.

On January 1, 20X3, Protecto held inventory purchased previously from Strand for $47,500. During 20X3, Protecto purchased an additional $101,000 of goods from Strand and held $56,500 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 $15,400, and on December 31, 20X3, it held goods it had purchased from Protecto for $7,000 during 20X3. Strands total purchases from Protecto in 20X3 were $33,000. Protecto sells inventory to Strand at cost plus a 40 percent markup.

The consolidated balance sheet at December 31, 20X2, contained the following amounts:

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.

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.)

b. Prepare a consolidated statement of cash flows for 20X3. (Amounts to be deducted should be indicated with a minus sign.)

PROTECTO CORPORATION AND STRAND COMPANY Consolidation Worksheet December 31, 20x3 Consolidation Entries Strand Company Protecto Corporation 440, (350,000) DR CR Consolidated Income Statement Sales $330,00e $101,000 $636,000 33,000 Less: Cost of Goods Sold (210,9e0) $ 9,50e 89,700 4,40e 31,000 (425,40e) Less: Depreciation Expense Less: Amortization Expense Less: Other Expense Income from Strand Co Consolidated Net Income NCI in Net Income of Strand (34,000) (24,000) (6,000) (79,500) 6, (36,500) 29,520 $49,020 (43,ee0) 33,120 $173,126e 20,480 $193,606e 3,600 $138,200 67,180 18,080 $140,600 49,020 2,400 $ 53,000 Controlling Interest in Net Income Statement of Retained Earnings Beginning Balance Net Income Less: Dividends Declared Ending Balance 49,826 $ 277,eee 49,020 54,000 272,020 160,000 53,000 $160,000e 193,600 $ 277,0ee 49,020 54,000 $169,600 272,020 $140,60e 29,000 29,000) $ 184,00e $353,606e Balance Sheet Assets Cash Accounts Receivable Inventory $29,20e 86,000 125,008 $ 69,200 128,000 203,506e 42,000 91,800 $ 11,30e 2,000 $30,006e 13,800 5,700 4,400 Patent Investment in Subsidiary 30,000 134,620 140, 520 18,000 Land Buildings and Equipment Less: Accumulated Depreciation 80,00e 428,000 (175,000) 21,800 230,00e (88,0e0) 23,000 64,000 78,800 594,00e (199,000) 64,ee0 Total Assets $707,820 $ 337,60e $117,900e $258,826e $, 904, 500 Liabilities & Equity Accounts Payable Bonds Pavable Common Stock Retained Earnings NCI In NA of Strand $99,800 166,000 170,000 272,020 $ 27,600 78,000 48,00e 184,008 $ 127,400 244,008 170,000 272,020 91,e80 $ 48,000 353,600 9,200 3,800 $414,606e $169,600 92,e80 12,00e $273,680 Total Liabilities & Equity $707, 820 $ 337,60e 904,500 PROTECTO CORPORATION AND SUBSIDIARY Consolidated Cash Flow Worksheet Year Ended December 31, 20X3 Consolidation Entries Balance 1/1/X3 Balance 12/31/X3 Item Debit Credit Assets Cash Accounts receivable Inventory Land Buildings and equipment Less: Accumulated depreciation Patents Total Assets Liabilities & Equity Accounts payable Bonds payable Common stock Retained earnings Noncontrolling interest Total Liabilities & Equity Cash Flows from Operating Activities 0 0 0 0 0 0 0 0 0 0 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 land 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 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 0 Cash balance at beginning of year Cash balance at end of year 0