Protecto Corporation purchased 60 percent of Strand Company's outstanding 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, Stranc 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: Debit Credit $ 99,000 Cash Accounts Receivable Inventory 185,000 150,000 80,000 500,000 42,000 Land Buildings and Equipment Patents Accumulated Depreciation Accounts Payable Bonds Payable Noncontrolling Interest Common Stock $ 210,000 137,200 94,000 112,800 220,000 282,000 $1,056,000 Retained Eamings $1,056,000 Totals 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 Company Consolidated Corporation DR CR Income Statement Sales $ 490,000 $380,000 $106,000 23.000 $741,000 Less: Cost of Goods Sold (375,000) (260,000) $10,000 (505,800) 93,200 5,400 20,600 Less: Depreciation Expense Less: Amortization Expense Less: Other Expense Income from Strand Co. Consolidated Net Income (68,000) (7,000) (84,000) 0 (39,000) (29,000) 7,000 (36,000) 22.920 (48,000) 27,120 4.200 $133,400 2.800 $136.200 $163,120 16.080 $179.200 $ 62,920 $ 43,000 $ (13,280) 62,920 76,200 NCI in Net Income of Strand $ 43,000 $ 62,920 Controlling Interest in Net Income Statement of Retained Earnings Beginning Balance Net Income $185,000 179,200 $ 282,000 $ 282,000 $185,000 43,000 (34.000) $194.000 $136,200 34,000 62,920 62,920 (59,000) $285,920 (59,000) $ 285,920 Less: Dividends Declared $364 200 $170.200 Ending Balance Balance Sheet Assets $ 30,200 $ 42500 Cash 72,700 Accounts Receivable Inventory 134,000 91,000 43,000 $12,800 2,400 130,000 92,800 207,600 S 35,000 6,600 35,000 Patent Investment in Subsidiary 166,320 163,320 21.000 6,000 5,400 75,000 22.800 11,000 Land 86,800 674,000 (209,000) 0 Buildings and Equipment Less: Accumulated Depreciation 473,000 270,000 69,000 (180,000) (98,000) 69,000 $122.000 $279,520 785,520 373,100 $1,001,100 Total Assets Liabilities & Equity Accounts Payable Bonds Payable Common Stock Retained Eamings $ 10,100 93,000 $ 113,700 269,000 220,000 285,920 112,480 $103,600 176,000 S 76,000 364,200 220,000 76,000 $170,200 285,920 194,000 NCI in NA of Strand 4.400 106,880 4,000 14,000 $ 785.520 $ 373.100 $448,600 $291,080 $1.001.100 Total Liabilities & Equity 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