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 ofthe 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 20:41. Strand purchased a piece ofland 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 20KB, 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, 20:43, 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: Debit Credit Cash $ 06,000 Accounts Receivable 150,000 Inventory 130,000 Land 73,000 Buildings and Equipment 458'999 Patents 42,000 Accumulated Depreciation 3213'096 Accounts Payable 174,300 Bands Payable 95,000 Monoontrolling Interest \"'79\" Common Stock 130,000 Retained Earnings 280,000 Totals W W The consolidation worksheet below was prepared on December 31, 20KB. All consolidation entries and adjustments have been entered properly in the worksheet. Protecto accounts for its Investment In Strand using the fully adjusted equlty 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 $ 559, 000 26, 006 Less: Cost of Goods Sold (310, 000) (150, 000 ) $ 8, 500 (338, 400 ) 85, 406 4, 500 23, 200 Less: Depreciation Expense (27, 500) (17, 500 ) (45, 000) Less: Amortization Expense 7, 006 (7, 000 Less: Other Expense (33, 000) (68, 000) 33, 220 (35, 000) Income from Strand Co. 38, 820 5, 600 Consolidated Net Income $ 92, 720 $ 47 , 500 $166, 820 $127, 200 $ 100, 600 NCI in Net Income of Strand 9, 280 1, 400 (7, 880) Controlling Interest in Net Income $ 92, 720 $ 47, 500 $176, 100 $128, 600 $ 92, 720 Statement of Retained Earnings Beginning Balance $ 280, 000 $ 170, 000 $170, 000 $ 280, 000 Net Income 92, 720 47 , 500 176, 106 $128, 600 92, 720 Less: Dividends Declared (55, 000) (22, 000) 22, 000 (55, 000 ) Ending Balance $ 317, 720 195, 500 $346, 100 $150, 600 $ 317, 720 Balance Sheet Assets cash $ 27 , 500 $ 36, 500 $ 64, 000 Accounts Receivable 80, 600 40, 600 121, 200 Inventory 120, 300 90, 500 9, 600 198, 400 2, 800 Patent $ 35, 000 35, 000 Investment in Subsidiary 205, 920 12, 000 201, 220 6, 800 28, 000 4, 500 Land 73, 000 20, 500 15, 000 78, 500 Buildings and Equipment 370, 000 0, 006 72, 500 537, 500 Less: Accumulated Depreciation (168, 000) (90, 000 ) 72, 500 (185, 500 ) Total Assets $ 709, 320 $ 338, 100 $130, 800 $329, 120 $ 849, 100 Liabilities & Equity Accounts Payable $ 123, 600 $ 15, 600 $ 139, 200 Bonds Payable 138, 000 72, 000 210, 000 Common Stock 130, 000 55, 000 $ 55, 000 130, 900 Retained Earnings 317, 720 195, 500 346, 100 $150, 600 317, 720 NCI in NA of Strand 3,006 49, 880 52, 180 1, 700 7, 000 Total Liabilities & Equity $ 709, 320 $ 338, 100 $405, 806 $207, 480 $ 849, 100 Required: a. Prepare a worksheet for a consolidated statement of cash flows for 20X3 using the indirect method.a. Prepare a worksheet 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 positive 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. Similarly, 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 Worksheet Year Ended December 31, 20X3 Consolidation Entries Item Balance 1/1/X3 Debit Credit Balance 12/31/X3 Assets Cash $ 96,000 $ 96,000 Accounts receivable 150,000 150,000 Inventory 130,000 130,000 Land 73,000 73,000 Buildings and equipment 150,000 450,000 Less: Accumulated depreciation (213,000) (213,000) Patents 12,000 42,000 Total Assets $ 728,000 $ 728,000 Liabilities & Equity Accounts payable 174,300 174,300 Bonds payable 95,000 95,000 Common stock 130,000 130,000 Retained earnings 280,000 280,000 Noncontrolling interest 48,700 48.700 Total Liabilities & Equity $ 728,000 $ 0 $ O $ 728,000 Cash Flows from Operating Activities: Consolidated net income $ 100,600 Amortization expense 7,000 Depreciation expense 45,000 Decrease in accounts receivable Increase in inventory Decrease in accounts payable Cash Flows from Investing Activities Purchase of land Acquisition of buildings and equipment from bond issue Purchase of buildings and equipment Cash Flows from Financing Activities: Dividends Paid: To Protecto Corp. shareholders To noncontrolling shareholders Issuance of bonds for buildings and equipment Decrease in cash $ 152,600 $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: Consolidated net income Adjustments for noncash items: Amortization expense Depreciation expense Changes in operating assets and liabilities: Decrease in accounts receivable Increase in inventory Decrease in accounts payable $ 0 Cash Flows from Investing Activities: Purchase of land Purchase of buildings and equipment O Cash Flows from Financing Activities: Dividends Paid: To Parent Company shareholders To noncontrolling shareholders $ Cash balance at beginning of year Cash balance at end of year $