On December 31, 20X2, P Inc. purchased 80% of the outstanding ordinary shares of S Company for $310,000. At that date, S had ordinary shares of $200,000 and retained earnings of $60,000. In negotiating the purchase price, it was agreed that the assets on S's statement of financial position were fairly valued except for plant assets, which had a $40,000 excess of fair value over carrying amount. It was also agreed that S had unrecognized intangible assets consisting of trademarks that had an estimated value of $24,000. The plant assets had a remaining useful life of eight years at the acquisition date and the trademarks would be amortized over a 12-year period. Any goodwill arising from this business combination would be tested periodically for impairment. P accounts for its investment using the cost method and uses the fair value enterprise (entity) theory to prepare consolidated statements.

Additional Information:

?At December 31, 20X6, an impairment test of S's goodwill revealed its recoverable amount is $50,000

?An impairment test indicated that the trademarks had a recoverable amount of $13,750.

The impairment loss on these assets (goodwill and trademarks) occurred entirely in 20X6.

Financial statements for P and S for the year ended December 31, 20X6, were as follows: INCOME STATEMENTS STATEMENTS OF FINANCIAL POSITION For the year ended December 31, 20X6 December 31, 20X6 P S P S Sales S 870,000 S Assets 515,000 Plant assets- Cost of goods sold (638,000) (360,000) $ net $ 230,000 160,000 Investment in Gross profit S S 155,000 Storm 310,000 232,000 Selling expenses (22,000) (35,000) Other 82,000 Other expenses (148,000) (72,000) investments 22,000 Interest and Notes dividend income 34,000 2,000 receivable 10,000 Inventory 100,000 180,000 Profit S 96,000 50,000 Accounts receivable 88,000 160,000 Cash 20,000 30,000 830,000 562,000 Shareholders' Equity and Liabilities Ordinary shares S 500,000 S 200,000 Retained earnings 110,000 150,000 Notes payable 130,000 100,000 Other current liabilities 10,000 50,000 Accounts payable 80,000 62,000 S 830,000 S 562,000