Foxx Corp. purchased 75% of the outstanding shares of Rabb Ltd. on January 1, Year 3, at a cost of $117,000. Non-controlling interest was valued at $35,000 by an independent business valuator at the date of acquisition. On that date, Rabb had common shares of $50,000 and retained earnings of $30,000. Fair values were equal to carrying amounts for all the net assets except the following:

The equipment had an estimated remaining useful life of 6 years on January 1, Year 3, and the software was to be amortized over 10 years. Foxx uses the cost method to account for its investment. The testing for impairment at December 31, Year 6, yielded the following fair values:
Software ...... $ 8,000
Goodwill ...... 20,000
The impairment loss on these assets occurred entirely in Year 6. Amortization expense is grouped with administrative expenses, and impairment losses are grouped with miscellaneous expenses. The parent's share of the goodwill noted above is $15,000.
The following are the financial statements of Foxx Corp. and its subsidiary Rabb Ltd. as at December 31, Year 6:

Additional Information
The notes payable are intercompany.
Required:
(a) Prepare the Year 6 consolidated financial statements.
(b) Calculate goodwill impairment loss and non-controlling interest on the con solidated income statement for the year ended December 31, Year 6, under parent company extension theory.
(c) If Foxx used parent company extension theory rather than entity theory, how would this affect the debt-to-equity ratio at the end of Year 6?

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Inventory Equipment Software Carrying amount $30,000 45,000 Fair value $19,000 69,000 15,000 BALANCE SHEETS December 31, Year 6 Rabb Ltd 10,000 30,000 40,000 44,000 76,000 30,000 Foxx Corp Cash Accounts receivable Note receivable Inventory Equipment, net Land Investment in Rabb 40,000 66,000 220,000 150,000 117,000 $593,000 $230,000 Bank indebtedness Accounts payable Notes payable Common shares Retained earnings $90,000 70,000 40,000 150,000 243,000 $593,000 60,000 50,000 120,000 $230,000 STATEMENTS OF RETAINED EARNINGS Year ended December 31, Year 6 Retained earnings, January 1, Year 6 Net income Dividends Retained earnings, December 31, Year 6 Foxx Corp $153,000 120,000 (30,000) $243,000 Rabb Ltd $92,000 48,000 (20,000) $120,000 INCOME STATEMENTS Year ended December 31, Year 6 Foxx Corp $821,000 15,000 836,000 480,000 40,000 116,000 80,000 716,000 $120,000 Rabb Lto $320,000 3,600 323,600 200,000 12,000 31,600 32,000 275,600 S48,000 Sales Investment income Cost of sales Administrative expenses Miscellaneous expenses Income taxes Net income