Financial statements of Parent Corp. and its subsidiary Sub Inc. on December 31, Year 12, are shown below:

BALANCE SHEETS
On December 31, Year 12
		Parent			Sub
Cash	$	49,000		$	1,900
Accounts receivable		109,000			94,000
Inventories		85,320			57,000
Land		39,000			79,000
Plant and equipment		440,000			790,000
Accumulated depreciation		(189,000	)		(309,000	)
Investment in Sub common shares		221,200			—
	$	754,520		$	712,900
Accounts payable	$	95,600		$	189,000
Accrued liabilities		8,900			11,800
Preferred shares		—			59,000
Common shares		450,000			160,000
Retained earnings		200,020			293,100
	$	754,520		$	712,900

RETAINED EARNINGS STATEMENTS
For the Year Ended December 31, Year 12
		Parent			Sub
Balance, January 1	$	210,020		$	342,100
Net income (loss)		23,000			(20,000	)
		233,020			322,100
Dividends		(33,000	)		(29,000	)
Balance, December 31	$	200,020		$	293,100

Other Information

• On January 1, Year 5, the balance sheet of Sub showed the following shareholders’ equity:

$8 cumulative preferred shares, 500 shares issued	$ 59,000
Common shares, 2,000 shares issued	160,000
Deficit (Note 1)	(89,000)
	$130,000

Note 1: Dividends on preferred shares are two years in arrears.

On this date, Parent acquired 1,400 common shares of Sub for a cash payment of $221,200.

The fair values of Sub’s identifiable net assets differed from carrying amounts only with respect to the following:

	Carrying amount			Fair value
Accounts receivable	$	43,000		$	41,000
Inventory		53,000			60,000
Plant		540,000			590,000
Long-term liabilities		316,000			336,000

The plant had an estimated remaining useful life of five years on this date, and the long-term liabilities had a maturity date of December 30, Year 12. Any goodwill is to be tested annually for impairment.

• Both Parent and Sub make substantial sales to each other at an intercompany selling price that yields the same gross profit as the sales they make to unrelated customers. Intercompany sales in Year 12 were as follows:

Parent to Sub	$ 280,000
Sub to Parent	357,000

• During Year 12, Parent billed Sub $2,000 per month in management fees. At year-end, Sub had paid for all months except for December.
• The January 1, Year 12, inventories of the two companies contained unrealized intercompany profits as follows:

Inventory of Parent	$ 23,000
Inventory of Sub	22,000

• The December 31, Year 12, inventories of the two companies contained unrealized intercompany profits as follows:

Inventory of Parent	$ 44,000
Inventory of Sub	46,000

• On July 1, Year 7, Sub sold equipment to Parent for $68,000. The equipment had a carrying amount in the records of Sub of $48,000 on this date and an estimated remaining useful life of five years.
• Goodwill impairment losses were recorded as follows: Year 7, $79,000; Year 9, $49,170; and Year 12, $20,160.
• Assume a 40% corporate tax rate.
• Parent has accounted for its investment in Sub by the cost method.
• All dividends in arrears were paid by December 31, Year 11.

Required:

Prepare the following statements with all necessary calculations:

(i) Year 12 consolidated retained earnings statement.

(ii) Consolidated balance sheet as of December 31, Year 12.