(a) Prepare the following consolidated financial statements for Year 6:

(i) Income statement

(ii) Statement of financial position

(b) Calculate goodwill impairment loss and profit attributable to non-controlling interest for the year ended December 31, Year 6, under parent company extension theory.

(c) Calculate goodwill and non-controlling interest on the consolidated statement of financial position at December 31, Year 6, under parent company extension theory.

(d) Prepare the consolidated financial statements using the worksheet approach. 

The financial statements of Post Corporation and its subsidiary, Sage Company, as at December 31, Year 6 are presented on the next page.

Additional Information

• Post purchased 70% of the outstanding shares of Sage on January 1, Year 4, at a cost of $84,000. On that date, Sage had accumulated depreciation of $13,000, retained earnings of $18,000, and fair values were equal to carrying amounts for all its net assets, except inventory (overvalued by $15,000).

Additional Information (continued)

• In determining the purchase price, the management of Post noted that Sage, as lessee, leases a warehouse under an operating lease that has terms that are unfavourable relative to market terms. However, the lease agreement explicitly prohibits transfer of the lease (through either sale or sublease). An independent appraiser indicated that the fair value of this unfavourable lease agreement is $21,000. There were five years remaining on this lease on the date of acquisition.

• The companies sell merchandise to each other at a gross profit rate of 25%.

• The December 31, Year 5, inventory of Post contained purchases made from Sage amounting to $17,000. There were no intercompany purchases in the inventory of Sage on this date.

• During Year 6 the following intercompany transactions took place:

• Sage made a payment of $27,000 to Post for management fees, which was recorded under the category "other expenses."

• Sage made sales of $102,000 to Post. The December 31, Year 6, inventory of Post contained goods purchased from Sage amounting to $30,000.

• Post made sales of $130,000 to Sage. The December 31, Year 6, inventory of Sage contained goods purchased from Post amounting to $21,000. 

• On July 1, Year 6, Post borrowed $54,000 from Sage and signed a note bearing interest at 12% per annum. The interest on this note was paid on December 31, Year 6.

• During the year, Sage sold land to Post and recorded a gain of $34,000 on the transaction. This land is being held by Post on December 31, Year 6. 

• Goodwill impairment losses occurred as follows: Year 4, $2, 700; Year 5, $540; Year 6, $1,350. 

• Neither Post nor Page paid any dividends during the year.

• Post uses the equity method to account for its investment in Sage. 

• Both companies pay income tax at 40% on their taxable incomes.

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STATEMENTS OF FINANCIAL POSITION December 31, Year 6 Sage Post $ 22,000 $178,000 Land 529,000 Plant and equipment Accumulated depreciation 64,000 (233,000) (20,000) Investment in Sage 129,227 Inventory 34,000 30,000 Notes receivable 54,000 17,500 10,200 Accounts receivable 12,500 $667,227 Cash 13,200 $173,400 $ 50,000 $100,000 Ordinary shares Retained earnings 266,200 89,000 Notes payable Accounts payable 54,000 247,027 $667,227 34,400 $173,400 STATEMENTS OF PROFIT–YEAR 6 Post Sage $930,000 $259,000 Sales Management fee revenue 27,000 Interest revenue 7,100 Equity method income from Sage 2,100 Gain on sale of land 34,000 300,100 959,100 Cost of goods sold 570,000 182,000 Interest expense 20,300 Other expenses 183,000 75,100 Income tax expense 83,000 16,000 856,300 273,100 $ 27,000 Profit $102,800