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 held 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 purchases 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: Credit $ Debit 102,000 200,000 151,500 83,000 530,000 33,000 Cash Accounts Receivable Inventory Land Buildings and Equipment Patents Accumulated Depreciation Accounts Payable Bonds Payable Noncontrolling Interest Common Stock Retained Earnings Totals $ 200,000 160, 220 88,000 116,280 250,000 285,000 $1,099,500 $1,099,500 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, 20X3 Consolidation Entries Protecto Strand Corporation Company DR CR Consolidated Income Statement Sales $ 520,000 $ 410,000 $109,000 26,000 $ 795,000 Less: Cost of Goods Sold (390,000) (290,000) (544, 800) $ 10,300 95,300 6,000 23,600 (42,000) (32,000) 5,500 174,000) (5,500) (86,700) (35,700) 20,460 72,760 (51,000) 37,000 O $ $ $ 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 23,760 $164,260 13, 440 $177,700 300 $138,500 200 $140,700 84,000 (11,240) 72,760 $ 72.760 $ 37,000 $ $ $200,000 177,700 285,000 72,760 (62,000) 295, 760 $ 200,000 37,000 (37,000) $ 200,000 $140,700 37,000 $177,700 $ 285,000 72,760 (62,000) $ 295, 760 $ $377,700 Balance Sheet Assets Cash Accounts Receivable Inventory $ 30,800 94,000 133,000 44,000 43, 600 93,400 74,800 137,600 210,300 $ 13,700 2,400 Patent Investment in Subsidiary 27,500 166, 680 $ 27,500 8,400 6,180 6,000 170,760 16,500 Land Buildings and Equipment Less: Accumulated Depreciation 14,000 72,000 78,000 504,000 (170,000) 23,400 290,000 (104,000) 87,400 722,000 72,000 (202,000) Total Assets $ 836, 480 $ 390, 400 $120,080 $289,360 $1,057,600 $ $ $ Liabilities & Equity Accounts Payable Bonds Payable Common Stock Retained Earnings NCI in NA of Strand 108,720 182,000 250,000 295, 760 12,400 96,000 82,000 200,000 $ 82,000 377,700 5, 600 4, 120 $469, 420 121, 120 278,000 250,000 295,760 112, 720 $177,700 111,440 11,000 $300, 140 Total Liabilities & Equity 836,480 $390,400 $1,057, 600 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 es 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 Debit Credit 1/1/X3 Item Balance 12/31/X3 Assets Cash Accounts receivable Inventory Land Buildings and equipment Less: Accumulated depreciation Patents Total Assets Liabilities & Equity Accounts payable Bonds payable Common stock Retained earings Noncontrolling interest Total Liabilities & Equity 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 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 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 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 held 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 purchases 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: Credit $ Debit 102,000 200,000 151,500 83,000 530,000 33,000 Cash Accounts Receivable Inventory Land Buildings and Equipment Patents Accumulated Depreciation Accounts Payable Bonds Payable Noncontrolling Interest Common Stock Retained Earnings Totals $ 200,000 160, 220 88,000 116,280 250,000 285,000 $1,099,500 $1,099,500 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, 20X3 Consolidation Entries Protecto Strand Corporation Company DR CR Consolidated Income Statement Sales $ 520,000 $ 410,000 $109,000 26,000 $ 795,000 Less: Cost of Goods Sold (390,000) (290,000) (544, 800) $ 10,300 95,300 6,000 23,600 (42,000) (32,000) 5,500 174,000) (5,500) (86,700) (35,700) 20,460 72,760 (51,000) 37,000 O $ $ $ 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 23,760 $164,260 13, 440 $177,700 300 $138,500 200 $140,700 84,000 (11,240) 72,760 $ 72.760 $ 37,000 $ $ $200,000 177,700 285,000 72,760 (62,000) 295, 760 $ 200,000 37,000 (37,000) $ 200,000 $140,700 37,000 $177,700 $ 285,000 72,760 (62,000) $ 295, 760 $ $377,700 Balance Sheet Assets Cash Accounts Receivable Inventory $ 30,800 94,000 133,000 44,000 43, 600 93,400 74,800 137,600 210,300 $ 13,700 2,400 Patent Investment in Subsidiary 27,500 166, 680 $ 27,500 8,400 6,180 6,000 170,760 16,500 Land Buildings and Equipment Less: Accumulated Depreciation 14,000 72,000 78,000 504,000 (170,000) 23,400 290,000 (104,000) 87,400 722,000 72,000 (202,000) Total Assets $ 836, 480 $ 390, 400 $120,080 $289,360 $1,057,600 $ $ $ Liabilities & Equity Accounts Payable Bonds Payable Common Stock Retained Earnings NCI in NA of Strand 108,720 182,000 250,000 295, 760 12,400 96,000 82,000 200,000 $ 82,000 377,700 5, 600 4, 120 $469, 420 121, 120 278,000 250,000 295,760 112, 720 $177,700 111,440 11,000 $300, 140 Total Liabilities & Equity 836,480 $390,400 $1,057, 600 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 es 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 Debit Credit 1/1/X3 Item Balance 12/31/X3 Assets Cash Accounts receivable Inventory Land Buildings and equipment Less: Accumulated depreciation Patents Total Assets Liabilities & Equity Accounts payable Bonds payable Common stock Retained earings Noncontrolling interest Total Liabilities & Equity 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 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 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