Protecto Corporation purchased 80 percent of Strand Companys 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 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 $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. Strands 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 $ 96,000 Accounts Receivable 150,000 Inventory 130,000 Land 73,000 Buildings and Equipment 450,000 Patents 42,000 Accumulated Depreciation $ 213,000 Accounts Payable 174,300 Bonds Payable 95,000 Noncontrolling Interest 48,700 Common Stock 130,000 Retained Earnings 280,000 Totals $ 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 Corporation Strand Company DR CR Consolidated Income Statement Sales $ 430,000 $ 250,000 $ 95,000 $ 559,000 26,000 Less: Cost of Goods Sold (310,000 ) (150,000 ) $ 8,500 (338,400 ) 85,400 4,500 23,200 Less: Depreciation Expense (27,500 ) (17,500 ) (45,000 ) Less: Amortization Expense 7,000 (7,000 ) Less: Other Expense (33,000 ) (35,000 ) (68,000 ) Income from Strand Co. 33,220 38,820 5,600 0 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 47,500 176,100 $ 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 0 6,800 28,000 4,500 Land 73,000 20,500 15,000 78,500 Buildings and Equipment 370,000 240,000 72,500 537,500 Less: Accumulated Depreciation (168,000 ) (90,000 ) 72,500 (185,500 ) 0 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 $ 55,000 130,000 Retained Earnings 317,720 195,500 346,100 $ 150,600 317,720 NCI in NA of Strand 3,000 49,880 52,180 1,700 7,000 Total Liabilities & Equity $ 709,320 $ 338,100 $ 405,800 $ 207,480 $ 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 (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.) b. Prepare a consolidated statement of cash flows for 20X3. (Amounts to be deducted should be indicated with a minus sign.)