n January $1,$ Year $4,$ Grant Corporation bought $9,000(80\%)$ of the outstanding common shares of Devy Company for $$78,750$ cash. Devy$$s shares were trading for $$7$ per share on the date of acquisition. On that date, Devy had $$28,125$ of common shares outstanding and $$33,750$ retained earnings. Also on that date, the carrying amount of each of Devy$$s identifiable assets and liabilities was equal to its fair value except for the following:

Carrying Amount Fair Value

Inventory $ $56,250$ $ $61,875$

Patent $11,25022,500$

The patent had an estimated useful life of five years at January $1,$ Year $4,$ and the entire inventory was sold during Year $4.$ Grant uses the cost method to account for its investment.

The following are the separate$-$entity financial statements of Grant and Devy as at December $31,$ Year $7$:

BALANCE SHEETS

At December $31,$ Year $7$

Grant Devy

Assets

Cash $ $5,625$ $ $20,250$

Accounts receivable $208,12592,250$

Inventory $348,750112,500$

Investment in Devy $78,750$

Equipment $($net$)258,750230,625$

Patent $($net$)2,250$

$ $900,000$ $ $457,875$

Liabilities and Shareholders$$ Equity

Accounts payable $ $213,750$ $ $219,375$

Other accrued liabilities $67,50056,250$

Income taxes payable $90,00081,000$

Common shares $191,25028,125$

Retained earnings $337,50073,125$

$ $900,000$ $ $457,875$

INCOME STATEMENT

Year ended December $31,$ Year $7$

Grant Devy

Sales $ $1,012,500$ $ $405,000$

Cost of goods sold $(382,500)(270,000)$

Gross margin $630,000135,000$

Distribution expense $(33,750)(28,125)$

Other expenses $(202,500)(63,000)$

Income tax expense $(135,000)(18,000)$

Net income $ $258,750$ $ $25,875$

Additional Information

The recoverable amount for goodwill was determined to be $$11,250$ on December $31,$ Year $7.$ The goodwill impairment loss occurred in Year $7.$

Grant$$s accounts receivable contains $$33,750$ owing from Devy.

Amortization expense is grouped with distribution expenses and impairment losses are grouped with other expenses.

Required:

$($a$)$ Calculate consolidated retained earnings at December $31,$ Year $7.($Input all values as positive numbers. Omit $ and $\%$ sign in your response.$)$

Calculation of consolidated retained earnings $$ Dec $31,$ Year $7$

Retained earnings $$ Grant $

Retained earnings $$ Devy $

Retained earnings on acquisition

Increase $

Grant's share

$\%$

Less: Changes to acquisition differential

$

$($b$)$ Prepare consolidated financial statements for Year $7.($Input all values as positive numbers.$)$