At the beginning of 20X2, Dahl Ltd. acquired 8% of the outstanding common shares of Tippy Ltd. for $400,000. This amounted to 80,000 shares.

At the beginning of 20X4, Dahl acquired an additional 270,000 shares of Tippy for $1,512,000. At this acquisition date, Tippy- shareholders’ equity consisted of the following:

4% non-cumulative preferred shares $1,000,000
Common shares, 1,000,000 outstanding shares 2,400,000
Retained earnings 2,160,000

At this acquisition date, the fair values of the net identifiable assets equalled their carrying values except for the following:

Excess of fair value
over carrying value
Inventory $ 96,000
Land 800,000

At the beginning of 20X5, Dahl acquired an additional 450,000 shares of Tippy for 2,880,000. The shares were trading for $6 per share. At this acquisition date, Tippy- shareholders’ equity consisted of the following:

4% non-cumulative preferred shares $1,000,000
Common shares, 1,000,000 outstanding shares 2,400,000
Retained earnings 2,560,000

At this acquisition date, the fair values of the net identifiable assets equalled their carrying values except for the following:

Excess of fair value over/(under)
carrying value
Accounts receivable $W(48,000)
Building and equipment (net) 720,000
Long-term debt 160,000

The building and equipment have an estimated remaining life of 10 years and the long-term debt matures in 10 years.

The condensed separate-entity financial statements for December 31, 20X6 are as follows:

Balance Sheets
As at December 31, 20X6

                                      Dahl Ltd.                      Tippy Ltd.
Assets:
Cash                               $ 400,000                    $ 560,000
Accounts receivable     1,920,000                      440,000
Inventories                     400,000                         320,000
Land                                 4,400,000                      800,000
Buildings and equipment (net) 8,488,000       7,200,000
Investment in Tippy (at cost) 4,792,000               ____-____
Total assets $                                20,400,000       $ 9,320,000
Liabilities:
Accounts payable                          $ 2,400,000            $ 400,000
Long-term debt                            3,200,000                 1,600,000
Total liabilities                                  5,600,000                2,000,000
Shareholders equity:
4% non-cumulative preferred shares   -                       1,000,000
Common shares                             7,200,000                   2,400,000
Retained earnings                           7,600,000                3,920,000
Total shareholders equity                14,800,000              7,320,000
Total liabilities and shareholders   $ 20,400,000              $ 9,320,000


Income Statements
Year Ended December 31, 20X6

                                            Dahl Ltd              . Tippy Ltd.
Sales                                 $ 12,000,000           $ 7,200,000
Dividend income                    96,000                      -
Gain on sale of equipment    _______                168,000
Total revenue                         12,096,000          7,368,000
Cost of goods sold                 7,600,000              4,960,000
Operating expenses                2,374,400               944,000
Income tax expense                825,600                  584,000
Total expenses                        10,800,000               6,488,000
Net income $                             1,296,000             $ 880,000


Additional information:

• Dahl and Tippy declared and paid dividends during 20X6 of $400,000 and $160,000, respectively.

• At the end of 20X5, the inventories of Dahl and Tippy included goods with intercompany profits of $68,000 and $152,000 respectively.

• During 20X6, Dahl sold goods to Tippy for $3,120,000 at a gross margin of 45%. At the end of 20X6, $200,000 of these goods were still in Tippy- inventory.

• During 20X6, Tippy sold goods to Dahl for $2,080,000 at a gross margin of 35%. At the end of the year, $320,000 of these goods were still in Dahl- inventory.

• On January 1, 20X6, Tippy sold some equipment to Dahl for $360,000. At that time, the equipment had a book value of $192,000 and an estimated remaining life of 8 years. Dahl has paid Tippy $252,000 and will pay the balance on January 31, 20X7.

• Both Dahl and Tippy use the straight-line method of amortization for their buildings and equipment.

• In 20X5, a goodwill impairment of $73,600 was recognized and a further impairment of $46,400 occurred in 20X6. Impairment losses are allocated 80% to Dahl and 20% to the non-controlling interest.

• Both companies are taxed at an average rate of 40%.

Required:

Calculate Dahl- 20X6 consolidated net income and identify the amount attributable to Dahl- shareholders and to the non-controlling interest. Be sure to show all your calculations. You are not required to prepare a consolidated income statement.