Protecto Corporation purchased 80 percent of Strand Company's outstanding shares on January 1, 20x1, for $44,800 more than book value. At that date, the fair value of the noncontrolling interest was $11,200 more than 20 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 $40,000 and later in the year sold it to Protecto for $55,000. Protecto is still holding the land as an investment. During 20X3, Protecto bonds with a value of $115,000 were exchanged for equipment valued at $115,000. On January 1, 20X3, Protecto held inventory purchased previously from Strand for $42,500. During 20X3, Protecto purchased an additional $95,000 of goods from Strand and held $48,000 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 $15,750, and on December 31, 20X3, it held goods it had purchased from Protecto for $9,800 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 $ 96,000 150,000 130,000 73,000 450,000 42,000 Cash Accounts Receivable Inventory Land Buildings and Equipment Patents Accumulated Depreciation Accounts Payable Bonds Payable Noncontrolling Interest Common Stock Retained Earnings Totals $213,000 174,300 95,000 48,700 130,000 280,000 $941,000 $941,000 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 $ 430,000 $ 250,000 $ 95,000 26,000 $ 559,000 Less: Cost of Goods Sold (310,000) (150,000) $ (338, 400) 8,500 85,400 4,500 23, 200 (27,500) (17,500) 7,000 (35,000) (33, 000) 33, 220 92, 720 $ (45,000) (7,000) (68,000) 0 $ 100, 600 (7,880) 38,820 $166,820 9, 280 47,500 5,600 $127,200 1,400 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 $ 92, 720 $ 47,500 $176, 100 $ 128, 600 $ 92,720 $ 280,000 92, 720 (55, 000) $ 317, 720 $ 170,000 47,500 (22,000) $ 195,500 $170,000 176, 100 $128, 600 22,000 $150, 600 $ 280,000 92, 720 (55,000) $ 317, 720 $346, 100 Balance Sheet Assets Cash Accounts Receivable Inventory $ $ 27,500 80, 600 120, 300 36,500 40, 600 90,500 64,000 121,200 198,400 $ 9, 600 2,800 Patent Investment in Subsidiary 35,000 0 205,920 $ 35,000 12,000 6, 800 4,500 201, 220 28,000 Land Buildings and Equipment Less: Accumulated Depreciation 73,000 370,000 (168,000) 20, 500 240,000 (90,000) 15,000 72,500 78,500 537,500 (185,500) 72,500 Total Assets $ 709,320 $ 338, 100 $130, 800 $329, 120 $ 849, 100 $ Liabilities & Equity Accounts Payable $ 123, 600 Bonds Payable 138,000 Common Stock 130,000 Retained Earnings 317, 720 NCI in NA of Strand Total Liabilities & Equity $709,320 15,600 72,000 55,000 195,500 $ 55,000 346, 100 3,000 1,700 $405, 800 $ 139,200 210,000 130,000 317, 720 52, 180 $150, 600 49, 880 7,000 $207, 480 $ 338, 100 $ 849, 100 Required: a. Prepare a worksheet for a consolidated statement of cash flows for 20x3 using the indirect method. Values in the first two columns Ithe Warent and subsidiary balances that are to be deducted should Protecto Corporation purchased 80 percent of Strand Company's outstanding shares on January 1, 20x1, for $44,800 more than book value. At that date, the fair value of the noncontrolling interest was $11,200 more than 20 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 $40,000 and later in the year sold it to Protecto for $55,000. Protecto is still holding the land as an investment. During 20X3, Protecto bonds with a value of $115,000 were exchanged for equipment valued at $115,000. On January 1, 20X3, Protecto held inventory purchased previously from Strand for $42,500. During 20X3, Protecto purchased an additional $95,000 of goods from Strand and held $48,000 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 $15,750, and on December 31, 20X3, it held goods it had purchased from Protecto for $9,800 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 $ 96,000 150,000 130,000 73,000 450,000 42,000 Cash Accounts Receivable Inventory Land Buildings and Equipment Patents Accumulated Depreciation Accounts Payable Bonds Payable Noncontrolling Interest Common Stock Retained Earnings Totals $213,000 174,300 95,000 48,700 130,000 280,000 $941,000 $941,000 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 $ 430,000 $ 250,000 $ 95,000 26,000 $ 559,000 Less: Cost of Goods Sold (310,000) (150,000) $ (338, 400) 8,500 85,400 4,500 23, 200 (27,500) (17,500) 7,000 (35,000) (33, 000) 33, 220 92, 720 $ (45,000) (7,000) (68,000) 0 $ 100, 600 (7,880) 38,820 $166,820 9, 280 47,500 5,600 $127,200 1,400 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 $ 92, 720 $ 47,500 $176, 100 $ 128, 600 $ 92,720 $ 280,000 92, 720 (55, 000) $ 317, 720 $ 170,000 47,500 (22,000) $ 195,500 $170,000 176, 100 $128, 600 22,000 $150, 600 $ 280,000 92, 720 (55,000) $ 317, 720 $346, 100 Balance Sheet Assets Cash Accounts Receivable Inventory $ $ 27,500 80, 600 120, 300 36,500 40, 600 90,500 64,000 121,200 198,400 $ 9, 600 2,800 Patent Investment in Subsidiary 35,000 0 205,920 $ 35,000 12,000 6, 800 4,500 201, 220 28,000 Land Buildings and Equipment Less: Accumulated Depreciation 73,000 370,000 (168,000) 20, 500 240,000 (90,000) 15,000 72,500 78,500 537,500 (185,500) 72,500 Total Assets $ 709,320 $ 338, 100 $130, 800 $329, 120 $ 849, 100 $ Liabilities & Equity Accounts Payable $ 123, 600 Bonds Payable 138,000 Common Stock 130,000 Retained Earnings 317, 720 NCI in NA of Strand Total Liabilities & Equity $709,320 15,600 72,000 55,000 195,500 $ 55,000 346, 100 3,000 1,700 $405, 800 $ 139,200 210,000 130,000 317, 720 52, 180 $150, 600 49, 880 7,000 $207, 480 $ 338, 100 $ 849, 100 Required: a. Prepare a worksheet for a consolidated statement of cash flows for 20x3 using the indirect method. Values in the first two columns Ithe Warent and subsidiary balances that are to be deducted should