Protecto Corporation purchased 80 percent of Strand Company's outstanding shares on January 1, 20X1, for $23,800 more than book value. At that date, the fair value of the noncontrolling Interest was $16,200 more than 20 percent of Strand's book value. The full onsidered related to patents and is being amortized over an eight-year period. In 20X1, Strand purchased a plece of land for $60,000 and later in the year sold it to Protecto for $86,000. Protecto is still holding the land as an Investment. During 20X3, Protecto bonds with a value of $165,000 were exchanged for equipment valued at $165,000. On January 1, 20X3, Protecto held Inventory purchased previously from Strand for $49,000. During 20X3, Protecto purchased an additional $104,000 of goods from Strand and held $61,000 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 $17,500, and on December 31, 20X3, It held goods It had purchased from Protecto for $7,700 during 20X3. Strand's total purchases from Protecto In 20X3 were $21,000. 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 97,000 175,000 154,500 78,000 480,000 3e, eee Cash Accounts Receivable Inventory Land Buildings and Equipment Patents Accumulated Depreciation Accounts Payable Bonds Payable Noncontrolling Interest Common Stock Retained Earnings Totals $ 288,888 180,260 98,00 48,240 200,eee 280, eee $1,214,500 $1,814,500 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 Corporation strand Company Consolidated Income statement Sales $ 470, eee $ 360,000 $ 795,000 $184,000 21,000 Less: Cost of Goods Sold (365,000) (240,000) $ (479,680) 9,800 91,800 5, 18,800 (37,888) (27,00) 5, eee (64,000) (5,000) (82,200) (46,000) (36,200) 34,488 66,280 $ $ 47,000 $ 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 38,480 $ 168,480 8,92 $177,482 4, eee $129,400 1,eee $130,400 74,200 (7,920) 66,280 $ 66,280 $ 47,808 $ $175,000 177,400 $ 280,000 66,280 (57,000) $ 289,280 $ 175,000 47,000 (32,60e) $ 190,eee $ 130,400 32,000 $ 162,468 $ 280,000 66,280 (57, ) $ 289,280 $352,482 Balance sheet Assets Cash Accounts Receivable Inventory $ $ 29,800 89,000 128,000 41,500 42,600 92,480 $ 71,300 131,600 206,00 $ 12,200 2,200 25,000 Patent Investment in Subsidiary 196,842 $ 25,000 20,800 7,840 5,600 210,480 20,600 Land Buildings and Equipment Less: Accumulated Depreciation 83,000 449,000 (178,000) 22,400 260, eee (94,088) 26,eee 67,000 79,400 642,000 (285,) 67, Total Assets $ 797,640 $ 354,900 $125,548 $337,888 $ 950,300 $ Liabilities & Equity Accounts Payable Bonds Payable Common Stock Retained Earnings NCI in NA of Strand $ 136,360 172, 200,000 289,280 11,90 91,00 72,000 190, see $ 72, 352,400 5,200 1,960 $431,560 $ 148,260 263,000 200, eee 289,280 49,760 $162,488 51,920 5, eee $ 219,320 Total Liabilities & Equity $ 797,640 $ 354,900 $ 950,300 b. Prepare a consolidated statement of cash flows for 20X3. (Amounts to be deducted should be indicated with a minus slgr 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