Large Ltd. purchased 75% of Small Company on January 1, Year 6, for $750,000, when the statement of financial position for Small showed common shares of $540,000 and retained earnings of $240,000. On that date, the inventory of Small was undervalued by $60,000, and a patent with an estimated remaining life of five years was overvalued by $86,000. Small reported the following subsequent to January 1, Year 6: Year 6 Year 7 Year 8 Profit (Loss) Dividends $136,000 $39,000 (49,000) 104,000 24,000 54,000 A test for goodwill impairment on December 31, Year 8, indicated a loss of $20,700 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 $640,000 340,000 (56,000) $ 924,000 Required: (a) Prepare the cost method journal entries of Large for each year. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Year 6 1 No Date Year 6 Answer is complete and correct. General Journal Debit Credit Investment in Small 750,000 Cash 750,000 2 Year 6 Cash Dividend income 29,250 29,250 Year 7 No Date 1 Year 7 Cash Dividend income Year 8 1 No Date Year 8 Cash Dividend income Answer is complete and correct. General Journal Answer is complete and correct. General Journal Debit Credit 18,000 18,000 Debit 40,500 Credit 40,500 (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 $173300 (ii) Non-controlling interest on the statement of financial position Non-controlling interest $256835 (iii) Retained earnings, beginning of year Retained earnings, beginning of year $640000 (iv) Profit attributable to Large's shareholders Profit attributable to Large's shareholders $638800 (v) Profit attributable to non-controlling interest Profit attributable to non-controlling interest $ 374875 (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 2 Year 6 Investment in Small Equity method income Debit 750,000 Credit 750,000 102,000 102,000 3 Year 6 Cash 29,250 Investment in Small 29,250 4 Year 6 Investment in Small Equity method income 25,800 25,800 Year 7 Answer is complete but not entirely correct. No 1 Date Year 7 General Journal Investment in Small Equity method loss 2 Year 7 Cash Investment in Small Debit Credit -34,300 -34,300 18,000 18,000 3 Year 7 Equity method loss -12,900 Investment in Small -12,900 x Year 8 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 Answer is complete and correct. General Journal Debit Credit 78,000 78,000 40,500 40,500 2,625 2,625 (ii) Determine the investment in Small at December 31, Year 8. (Omit $ sign in your response.) Investment in Small under equity method $ 78000