Protecto Corporation purchased 60 percent of Strand Company's outstanding shares on January 1, 20X1, for $40,000 more than book value. At that date, the fair value of the noncontrolling interest was $16,000 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 $66,000 and later in the year sold it to Protecto for $78,000. Protecto is still holding the land as an investment. During 20X3, Protecto bonds with a value of $180,000 were exchanged for equipment valued at $180,000.

On January 1, 20X3, Protecto held inventory purchased previously from Strand for $50,500. During 20X3, Protecto purchased an additional $107,000 of goods from Strand and held $65,500 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 $19,600, 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 $24,000. Protecto sells inventory to Strand at cost plus a 40 percent markup.

2. Award 25.00 points Protecto Corporation purchased 60 percent of Strand Company's outstanding shares on January 1, 20X1, for $40,000 more than book value. At nat date, the fair value of the noncontrolling Interest wes $16,000 more than 40 percent of Strand's book value. The full amount of the differential in considered related to patents and is being amorttred over an eight-year period. In 20X1, Strand purchased a piece of land for $60,000 and lake year sold Il to Protecta for $78,000. Protecto is still holding the tand as an investment During 20X3, Protecto bonds with a value of $180.000 were exchanged for equipment valued at $180,000. On January 1. 20X3. Protecto hold inventory purchased previously from Stand for $50,500. During 20X3, Protecto purchased an additional $107,000 of goods from Strand and held $85,500 of this inventory on December 31, 20X3. Strand sets merchandise to the parent at cost plus a 25 percent markup Strand also purchases Inventory toms from Protecto. On January 1. 20X3, Strand held inventory It had previously purchased from Protecto for $19,800, 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 $24.090. Protecto sells Inventory to Stand at cost plus a 40 percent markup. The consolidated balance sheet at December 31, 20X2, contained the following amounts: Dobl Cash $ 100,000 Cred Accounts Receivable 190.000 Inventor 150.500 Land 81.000 Buildings and Equipment $10,000 Patents 42,000 Accumulated Depreciation $ 211.000 Accounts Payton 142.340 Bonds Payable 92.000 controlling Interest 115,100 Common Stock 230,000 Retained Earrings 203,000 Totala 1,073 500 31073 500 solidation worksheet below was prepared on December 31, 20X3. All consolidation entries and adjustments have been entered property 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 Protecto Corporation Strand Consolidation Enirlos Income Statement party DR CF Consolidated Sales $ 500.000 $ 390,000 $107.000 $ 759.000 Less: Cool of Goods Sold (380,000) (270,000) 24,000 $ 10.100 85.900 (318,800) 8 600 21,000 Lose: Depreciation Expense (40.000) 70.000) Loss: Amortization Exper (30,000) 7,000 Loss: Other Expense (35000) (49,000) (7.000) (84.000) Income from Strand Co. 4.200 Consolidated Net Income $ 41,000 $164,000 $135.400 NC In Net Income of Strand $ 85 800 002 6215 2800 78.500 1 58 200 (124001 Controlling Interest in Net Income $ 41 000 45 900 Somement of Retained Earnings spinning Balance 203.000 $ 190,000 $190.000 Net Income 63,900 $1.000 179,200 $138.200 $ 283.000 85,000 Less: Dividenda Declared 35.000 Ending Balance $ 208 900 53.0001 3 190.900 $389 209 160.6001 173.209 Balance Sheet 30.400 $ 43.000 Accounts Receivable 92.000 43.200 73,400 Inventory 131.000 25.000 13.100 135,20 208,50 187.940 $ $5.000 35,00 Investment in Subsidiary 7,200 6.060 21.000 8,600 Land 78.000 23.000 12,00 87,00 Buildings and Equipment 480.000 260,000 70.000 690.00 Less: Accumulated Osprechtion (181,000) (100,000) 70 000 (211.000 Total Assets $ 796 940 $ 942,200 $123 MO $204 500 $1 018,100 Llabattles & Equity Accounts Payable $ 99.440 $ 14.200 $ 113.840Bonds Payable Common Stock 178,100 230,000 04.000 78,000 $ 78,000 272.000 Retained Earnings NCI In NA of Strand 106,000 $69.200 $173.200 230,000 4,800 108,400 113.900 Total Undthies & Equity 1040 $456,040 $1 018 100 Required a. Prepare a worksheel 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 posldive 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. Similarty, 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 Workshoot Year Ended December 31, 20X3 Consolidation Entries alanc Dobe Credit Cash 100,000 100,000 Accounts receivable 190.000 inventory 150,300 150.500 Land 81,000 61.000 Buildings and equipment $10.000 Less: Accumulated depreciation 211.0002 47.000 211.000) 542 500 42.000 Toul Assets 802.500 Libation & Equity Accounts pay by 142.340 142.940 Bonds payable 92.000 $2.00 Common stock 283.000 230,000 215. 160 283.000 oncontrolling thered 862.500 3 113.180 Total Liabilities & Equity 602.50 Cash Flows from Operating Activities Consolidated net income Amortization Expense Depreciation expense Decrease in socounts receivable increase in Inventory Decrease In accounts payable Cash Flows from Investing Activates: Purchase of tand Acquianion of buildings and equipment from bond has Purchase of buildings and equipment Cash Flows from Firwinding Activities Medenda Paid: To Protecto Corp. shareholders To noncontrolling shareholders Issuance of boris for buildings and equipment Decrease in cash D. Propere 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 91, 20X3 Cash Flows from Operating Activities: Consolidated net income Adjustments for noncash Home: Amortization expense Cletion corpence Changes In operating sasets and Babaities Decrease In accounts receivable increase In inventory Decrease In accounts payable Net cash provided by operating activities Cash Flows from Investing Activities Purchase of land Purchase of buildings and equipment Net cash used in Investing activities Cash Flows from Financing Activites: Dividends Puld To Parent Company shareholders To noncontrolling shareholders Not caan used in financing activities Not decrease In cash Cash balance at beginning of your 100 000 Cash balance at end of your $ 100.000 References Financial Statements Dimculty' 3 Hard cash flows. Learning Objective 10-01 Prepare a consondated statement of