On December 31, Year 2, Palm Inc. purchased 80% of the outstanding ordinary shares of Storm Company for $350,000. At that date, Storm had ordinary shares of $240,000 and retained earnings of $64,000. In negotiating the purchase price, it was agreed that the assets on Storms statement of financial position were fairly valued except for plant assets, which had a $44,000 excess of fair value over carrying amount. It was also agreed that Storm had unrecognized intangible assets consisting of trademarks that had an estimated value of $36,000. 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. Palm accounts for its investment using the cost method.

Financial statements for Palm and Storm for the year ended December 31, Year 6, were as follows:

STATEMENTS OF FINANCIAL POSITION
December 31, Year 6
	Palm			Storm
Assets
Plant assets (net)	$	270,000		$	200,000
Investment in Storm		350,000
Other investments		86,000			26,000
Notes receivable					14,000
Inventory		140,000			220,000
Accounts receivable		92,000			180,000
Cash		24,000			34,000
	$	962,000		$	674,000
Shareholders' Equity and Liabilities
Ordinary shares	$	540,000		$	240,000
Retained earnings		150,000			190,000
Notes payable		150,000			120,000
Other current liabilities		14,000			54,000
Accounts payable		108,000			70,000
	$	962,000		$	674,000

INCOME STATEMENTS
For the year ended December 31, Year 6
		Palm				Storm
Sales	$	910,000			$	555,000
Cost of goods sold		(658,000	)			(380,000	)
Gross profit	$	252,000			$	175,000
Selling expenses		(26,000	)			(39,000	)
Other expenses		(156,000	)			(80,000	)
Interest and dividend income		38,000				6,000
Profit	$	108,000			$	62,000

Additional Information

• At December 31, Year 6, an impairment test of Storms goodwill revealed the following:

Fair value less disposal costs based on recent offer from prospective purchaser	$	50,000
Value in use based on undiscounted future net cash flows		69,000
Value in use based on discounted future net cash flows using a discount rate of:
8%, which is Storm's incremental borrowing rate		42,000
2%, which is the risk-free rate on government bonds		47,000

• An impairment test indicated that the trademarks had a recoverable amount of $14,350. The impairment loss on these assets occurred entirely in Year 6.
• On December 26, Year 6, Palm declared dividends of $40,000, while Storm declared dividends of $24,000.
• Amortization expense is reported in selling expenses, while impairment losses are reported in other expenses.

Required:

(a) Prepare consolidated financial statements. (Input all values as positive numbers.)

(b) Assuming that none of the acquisition differential had been allocated to trademarks at the date of acquisition complete the table given below. (Leave no cells blank - be certain to enter "0" wherever required. Negative amount should be indicated by a minus sign. Omit $ sign in your response.)

	Bal		Changes				Bal
	Dec. 31/Yr2		Dec. 31/Yr2 to Dec.31/Yr5		Yr6		Dec. 31/Yr6
Plant assets	$		$		$		$
Goodwill
	$		$		$		$