Question
Protecto Corporation purchased 60 percent of Strand Companys outstanding shares on January 1, 20X1, for $40,500 more than book value. At that date, the fair
Protecto Corporation purchased 60 percent of Strand Companys 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 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 $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, Strand 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. Strands 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 | |||||||
Cash | $ | 99,000 | ||||||
Accounts Receivable | 185,000 | |||||||
Inventory | 150,000 | |||||||
Land | 80,000 | |||||||
Buildings and Equipment | 500,000 | |||||||
Patents | 42,000 | |||||||
Accumulated Depreciation | $ | 210,000 | ||||||
Accounts Payable | 137,200 | |||||||
Bonds Payable | 94,000 | |||||||
Noncontrolling Interest | 112,800 | |||||||
Common Stock | 220,000 | |||||||
Retained Earnings | 282,000 | |||||||
Totals | $ | 1,056,000 | $ | 1,056,000 | ||||
a. Prepare a worksheet for a consolidated statement of cash flows for 20X3 using the indirect method
b. Prepare a consolidated statement of cash flows for 20X3. (Amounts to be deducted should be indicated with a minus sign.)
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