On April 1, Year 1, Company P purchased 85% of S Company for total consideration of $357,000, which included $30,000 of contingent consideration as measured according to GAAP at fair value. Each company has a December 31 year-end. The cost method is used to account for the investment in S. The income statements, balance sheets, and the statements of cash flows for relevant time periods are reported below along with consolidated numbers. On the acquisition date, land on Company S's books is undervalued by $40,000. Any remaining excess of purchase price over fair value of net assets is attributed to goodwill. At the end of Year 1, Company S declared, but did not pay, a $30,000 dividend. The contingent consideration had increased in fair value to $36,600 as of December 31, Year 1. The financial statements are presented below.

Required:
1. Prepare the computation and allocation of difference between implied and book value acquired schedule on the date of acquisition.
2. Prepare the consolidated work paper for year 1.
3. Examine the consolidated statement of cash flows prepared using the indirect format.
Determine how the following amounts were computed and indicate the direction of the change in the account and the effect of the change on cash from operations.
a. Controlling interest in income, $148,620
b. Cash paid for acquisitions, $320,400
c. The change in accounts receivable, $15,300
d. The change in inventory, ($15,600)
e. The change in accounts and notes payable, $61,500

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Three Months ending April 1st, Year 1 For the Year ending December 31, Year 1 Income Statement S Co P Co. S Co Consolidated 1、260,000 25,500 1,285,500 924,000 192,000 57,600 1.173,600 Revenue Dividend income Total Revenue 315,000 195,000 780,000 1,845,000 315,000 231,000 48,000 14,400 293,400 195,000 113,100 24,000 13,500 150,600 780,000 452,400 156,000 54,000 662,400 1.845,000 1,263,300 324,000 98,100 1,685,400 159,600 (10,980) 148,620 213,000 148,620 Cost of goods sold Selling, General & Administration Other expenses Total expenses Consolidated Income Noncontrolling interest Income to Retained Earning Beginning Retained earnings Net income Dividends declared Ending Retained earnings 21,600 213,000 21,600 44,400 144,600 44.400 111,900 213,000 111,900 117,600 144,600 117,600 30,000 232,200 234.600 189,000 324,900 361,620 Cosoidaed 12. $60000 02000 6500 72,600 $33000 159.30 $15000 Cush Accounts Receiv abe Divideds Reccivabb Imentay Imvestment in S Company Codwill Property and Equipment Totil Accounts and Noes Payabl Contingnt Corsideration DividendsPay able NocontrolingInterest Capital Slok, $5 pr Value Other Contrib uted Capital RetiedEamings Total $9000 69000 16 800 $18,000 78 00 2550 139 200 357,000 102000 137,400 357000 132000 73,200 78,000 13200 217,20 219000 47,800 510000 1095,O 129.110 10 1000 510000 $804000 270000 S421 21 $101,400 61,600 $1,179 610 $116100 36 600 311 400 $485,40 100 91300 $1,368300 $1 94100 3660 4,50 6948 162000 540000 361,62 $814000 39000 $78000 S39000 30000 132000 420000 21 3000 914000 162,000 540010 24,810 1095,10 132 000 420000 213000 314000 24000 162,000 540,000 324, 0 S1,179 10 24,00 24000 121,200 144600 421,210 19000 23225 $435.400 $1,363 Statement of Cash Flows For Year Ending 12/31/Year 1 P C ompany S Company Consolidated Net Income 111,900 117,600 159,600 45,000 (12,000) (4,800) Depreciation 40,000 73,750 Change in following accounts: Accounts Receivable Dividends Receivables Inventory Accounts and Notes Payable Contingent Consideration 23,700 (25,500) (7,200) 77.100 6,600 226,600 15,300 (15,600) $61,500 6.600 301,150 (23,400) Cash from Operations Investing Purchase Property, Plant & Equipment Acquisitions 122,400 (91,600) (327,000) (418,600) (86,400) (157,750) (320,400) (478,150) Cash from Investing Activities inancing Issue (retire) Debt or Stock Cash Dividends Paid ($86,400) 150,000 150,000 ($27,000) 150,000 (30,000) (30,000) S6,000 Cash from Financing Activities 150,000 Change in Cash ($42,000)