05-02 (LO2, 3, 5) Large Ltd. purchased 70% of Small Company on January 1, Year 6, for $700,000, when the statement of financial position for Small showed common shares of $470,000 and retained earnings of $170,000. On that date, the inventory of Small was undervalued by $47,000, and a patent with an estimated remaining life of five years was overvalued by $72,000. Small reported the following subsequent to January 1, Year 6: Profit (Loss) Dividends Year 6 Year 7 Year 8 $108,000 $32,000 (42,000) 17,000 97,000 47,000 A test for goodwill impairment on December 31, Year 8, indicated a loss of $20,000 should be reported for Year 8 on the consolidated income statement. Large uses the cost method to account for its investment in Small and reported the following for Year 8 for its separate-entity statement of changes in equity. Retained earnings, beginning Profit Dividends Retained earnings, end $570,000 270,000 (63,000) $777,000 (b) Compute the following on the consolidated financial statements for the year ended December 31, Year 8: (Omit $ sign in your response.) (i) Goodwill Goodwill $301700 O (ii) Non-controlling interest on the statement of financial position Non-controlling interest $ 312150 (iii) Retained earnings, beginning of year $ 596640 Retained earnings, beginning of year (iv) Profit attributable to Large's shareholders Profit attributable to Large's shareholders (v) Profit attributable to non-controlling interest Profit attributable to non-controlling interest $ 331710 $ 28590 (c) Now assume that Large is a private entity, uses ASPE, and chooses to use the equity method to report its investment in Small. (i) Prepare Large's journal entries for each year related to its investment in Small. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Year 6 1 No Answer is complete but not entirely correct. Date General Journal Year 6 Investment in Small Cash Debit Credit 700,000 700,000 2 Year 6 Investment in Small Equity method income 84,000 84,000 3 Year 6 Cash 22,400 Investment in Small 22,400 4 Year 6 Equity method income 28,280 Investment in Small 28,280 Answer is complete but not entirely correct. No Date General Journal 1 Year 7 Equity method loss Investment in Small S Debit Credit 31,500 31,500 2 Year 7 Cash Investment in Small 11,900 11,900 3 Year 7 Investment in Small 10,920 Equity method loss 10,920 Year 8 Answer is complete but not entirely correct. General Journal No Date 1 Year 8 Investment in Small Equity method income 2 Year 8 Cash Investment in Small 3. Year 8 Equity method income Investment in Small Debit Credit 700,000 700,000 00 e 32,900 32,900 3,290 3,290 (ii) Determine the investment in Small at December 31, Year 8. (Omit $ sign in your response.) Investment in Small under equity method $ 728350