$1.$ ESE purchased $85\%$ of the common shares of SSM on January $2,2020$ for $$2,500,000$

in cash. At acquisition, SSM$$s common shares and retained earnings were $$650,000$

and $$1,250,000,$ respectively. On that date, the fair value $($FV$)$ of the assets equals their

net carrying value $($CV$)$ with the exception of the following:

a$.$ Accounts receivable had a CV of $550,000$ with a corresponding FV of $$490,000.$

The average accounts receivable turnover is $45$ days.

b$.$ Equipment had a FV of $$1,000,000$ and a corresponding CV of $$1,275,000.$ The

estimated useful life was $10$ years on the date of acquisition.

c$.$ A piece of land had a FV of $$650,000$ and a corresponding CV of $$350,000.$ This

land is still held by SSM$.$

d$.$ A patent for the new sweeper system had a FV of $$487,500$ with no

corresponding CV$.$ The estimated useful life was $15$ years on the date of

acquisition.

e$.$ Long$-$term debt had a FV of $$250,000$ with a corresponding CV of $$275,000.$ The

long$-$term debt matures on December $31,2024.$

$2.$ Goodwill is tested for impairment each year. In $2022,$ goodwill was determined to be

impaired by $$75,000.$ The fair value of goodwill did not change in $2023.$

$3.$ ESE purchased a total of $$900,000$ in inventory from SSM in $2023$ and $$700,000$ in

$2022.$ The ending inventory of ESE contained $40\%$ of the inventory purchased from

SSM$.$ The opening inventory of ESE held $20\%$ of the inventory purchased from SSM in

$2027.$ SSM earns a profit margin of $45\%$ on all its sales. ESE still owes $$20,000$ to SSM

for the inventory purchased near the end of $2023.$

$4.$ On April $1,2021,$ ESE sold a piece of equipment to SSM in return for a $$650,000$ note

receivable and $$100,000$ cash. The net carrying value at the time of the sale was

$$300,000.$ The equipment had a remaining useful life of $10$ years at the time of the sale.

The note receivable is payable in equal payments due on April $1$ each year, with the first

payment due April $1,2022.$ ESE does not charge any interest on the intercompany debt.

$5.$ ESE loaned several managers to SSM during $2023,$ charging a management fee of

$$330,000$ for their services. SSM still owes $$27,500$ for the last month of management

fees. Parents$-$ Retained Earnings $($partial$)$

Opening retained earnings $ $4,178,820$

Net income $1,602,912$

Dividends $850,000$

Closing retained earnings $ $4,931,732$ Subs$-$Statement of Changes in Shareholders$$ Equity $($partial$)$

Opening retained earnings $ $1,236,501$

Net income $1,116,751$

Dividends $364,000$

Closing retained earnings $ $1,989,252$ do the direct calculation for opening consolidated retained earnings and consolidated net income for the year in the direct method