Forest Company acquired Garden Company on July 1, Year 1. Information relating to acquisition and other relevant information for year 8 are given below.

Additional Information:

1. Forest acquired 90 percent of Garden for $207,900 on July 1, Year 1, and accounts for its investment under the cost method. At that time, the shareholders equity of Garden amounted to $175,000, and the assets of Garden were undervalued by the following amounts :

Assets

Amount

Remaining life

Inventory

$12,000

-

Buildings

10,000

10 years

Patents

16,000

8 years

1. During Year 8, Forest reported net income of $41,000 and paid dividends of $25, 000, whereas Garden reported net income of $63,000 and paid dividends of $50,000.
2. During Years 2 to 7, goodwill impairment losses totaled $1,950. An impairment test conducted in Year 8 indicated a further loss of $7,150.
3. Forest sells goods to garden on a regular basis at a gross profit of 30 percent. During Year 8, these sales totaled $150,000. On January 1, Year 8, the inventory of Garden contained goods purchased from Forest amounting to $18,000, while the December 31, Year 8, inventory contained goods purchased from Forest amounting to $ 22,000.
4. Forest's 6% bonds have a par value of $100,000. Interests are paid annually on December 31, and it will mature on December 31, year 11. These bonds had a carrying value of $93,376 on January 1, Year 8. On that date, Garden acquired $60,000 of these bonds on the open market at a cost of $57,966.
5. Garden owes Forest $22,000 on open account on December 31, Year 8.
6. Assume a 40 percent corporate tax rate and allocate bond gains (losses) between the two companies.

Required: From the above information calculate the following for year - 8:

1. Amount of goodwill on the date of acquisition. (5)
2. Schedule of amortization of acquisition differential. (5)
3. Inter-company profits and losses in inventory. (3)
4. Gains and losses from inter-company bond-holdings to the entity, to Forest and to Garden for year 8. (9)
5. Prepare Consolidated Net Income Statement for year 8.