On January 1, Year 4, Grant Corporation bought 8,000 (80%) of the outstanding common shares of Lee Company for $70,000 cash. Lee's shares were trading for $7 per share on the date of acquisition. On that date, Lee had $25,000 of common shares outstanding and $30,000 retained earnings. Also on that date, the carrying amount of each of Lee's identifiable assets and liabilities was equal to its fair value except for the following:

The patent had an estimated useful life of 5 years at January 1, Year 4, and the entire inventory was sold during Year 4. Grant uses the cost method to account for its investment.
Additional Information
€¢ The recoverable amount for goodwill was determined to be $10,000 on December 31, Year 6. The goodwill impairment loss occurred in Year 6.
€¢ Grant's accounts receivable contains $30,000 owing from Lee.
€¢ Amortization expense is grouped with distribution expenses and impairment losses are grouped with other expenses.
The following are the separate-entity financial statements of Grant and Lee as at December 31, Year 6.

Required:
(a) Calculate consolidated retained earnings at December 31, Year 6.
(b) Prepare consolidated financial statements for Year 6.

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Carrying aont $50,000 Fair value Inventory Patent lue $55,000 20,000 10,000 BALANCE SHEETS December 31, Year 6 Grant Lee Assets Cash Accounts receivable Inventory Investment in Lee Equipment, net Patent, net S 5,000 185,000 310,000 70,000 230,000 $18,000 82,000 100,000 205,000 2,000 $800,000 $407,000 Liabilities and Shareholders' Equity Accounts payable Other accrued liabilities Income taxes payable Common shares Retained earnings $190,000 60,000 80,000 170,000 300,000 $800,000 $195,000 50,000 72,000 25,000 65,000 $407,000 INCOME STATEMENT Year ended December 31, Year 6 Sales Cost of goods sold Gross margin Distribution expense Other expenses Income tax expense Net income Grant $900,000 (340,000) 560,000 (30,000) (180,000) 120,000 $230,000 Lee $360,000 (240,000) 120,000 (25,000) (56,000) (16,000) $ 23,000