On December 31, Year 4, Prospect Company purchased 60% of the outstanding common shares of Story Company for $1,350,000. On that date, Story had common shares of $500,000 and retained earnings of $110,000. In negotiating the purchase price, it was agreed that recorded assets and liabilities were fairly valued except for equipment, which had a $24,000 excess of carrying amount over fair value, and land, which had a $149,000 excess of fair value over carrying amount. The equipment had a remaining useful life of six years at the acquisition date and no salvage value. Story did not record the fair value deficiency on the equipment because Story felt that it would recover the carrying amount of this equipment through future cash flows. In addition, Story registered and owns number of Internet domain names, which are estimated to be worth $99,000. The right to the names expires in 12 years but the registration can be renewed for 20 years every 20 years, for a nominal fee. The adjusted trial balances for Prospect and Story for the year ended December 31, Year 8, were as follows: $ Story 94,000 245,000 314,000 360,000 680,000 406,000 Cash Accounts receivable Inventory Land Building (net) Equipment (net) Investment in Story Cost of goods purchased Change in inventory Amortization expense Income taxes and other expenses Dividends paid Total debits Accounts payable Long-term debt Common shares Retained earnings, beginning Sales Other revenues Prospect $ 190,000 201,000 632,000 760,000 900,000 728,000 680,400 2,397,000 98,000 202,000 903,000 376,800 $ 8,068,200 $ 484,000 252, 600 1,200,000 571,200 5,170,000 112,000 2,422,000 (49,000) 101,000 451,000 247,000 $5,271,000 $ 334,000 768,000 500,000 279,000 3,390,000 Other revenues Equity method income from Story Total credits 112,000 278,400 $8,068, 200 $5,271,000 Additional Information: Every year, goodwill is evaluated to determine if there has been a loss. The recoverable amount for Story's goodwill was valued at $99,000 at the end of Year 7 and $75,000 at the end of Year 8. Prospect's inventories contained $350,000 of merchandise purchased from Story at December 31, Year 8, and $400,000 at December 31, Year 7. During Year 8, sales from Story to Prospect were $680,000. Merchandise was priced at the same profit margin as applicable to other customers. Prospect owed $188,000 to Story at December 31, Year 8, and $196,000 at December 31, Year 7. On July 1, Year 5, Story purchased a building from Prospect for $788,000. The building had an original cost of $838,000 and a carrying amount of $638,000 on Prospect's books on July 1, Year 5. Story estimated the remaining life of the building was 15 years at the time of the purchase from Prospect. Story rented another building from Prospect throughout the year for $3,000 per month. Prospect uses the equity method of accounting for its long-term investments. Both companies pay tax at the rate of 40%. Ignore deferred income taxes when allocating and recording changes to the acquisition differential. Required: (a) Prepare a consolidated income statement for the year ended December 31, Year 8. (Enter your answers in thousands of dollars. Round your "Shareholders of Prospect" and "Non-controlling interest" answers to 1 decimal place. Input all values as positive Required: (a) Prepare a consolidated income statement for the year ended December 31, Year 8. (Enter your answers in thousands of dollars. Round your "Shareholders of Prospect" and "Non-controlling interest" answers to 1 decimal place. Input all values as positive numbers.) $ 7,880 40 Consolidated Income Statement December 31, Year 8. Sales Other revenues Total revenues $ Cost of goods purchased $ Change in inventory Amortization expense Goodwill impairment Income tax and other expenses 7,920 4,139 34 $ 4,173 Total expenses Consolidated net income Attributable to: Shareholders of RAV Non-controlling interest (b) Prepare the current assets; property, plant, and equipment; and intangible assets sections of the consolidated balance sheet at December 31, Year 8. (Enter your answers in thousands of dollars.) Consolidated Balance Sheet December 31, Year 8. Current assets Cash Accounts receivable Inventory Property, plant & equipment Land Building - net Equipment - net Intangible assets Internet domain names Goodwill (c) Calculate non-controlling interest on the consolidated balance sheet at December 31, Year 7. (Enter your answer in thousands of dollars. Round your answer to 1 decimal place. Omit $ sign in your response.) Non-controlling interest $ On December 31, Year 4, Prospect Company purchased 60% of the outstanding common shares of Story Company for $1,350,000. On that date, Story had common shares of $500,000 and retained earnings of $110,000. In negotiating the purchase price, it was agreed that recorded assets and liabilities were fairly valued except for equipment, which had a $24,000 excess of carrying amount over fair value, and land, which had a $149,000 excess of fair value over carrying amount. The equipment had a remaining useful life of six years at the acquisition date and no salvage value. Story did not record the fair value deficiency on the equipment because Story felt that it would recover the carrying amount of this equipment through future cash flows. In addition, Story registered and owns number of Internet domain names, which are estimated to be worth $99,000. The right to the names expires in 12 years but the registration can be renewed for 20 years every 20 years, for a nominal fee. The adjusted trial balances for Prospect and Story for the year ended December 31, Year 8, were as follows: $ Story 94,000 245,000 314,000 360,000 680,000 406,000 Cash Accounts receivable Inventory Land Building (net) Equipment (net) Investment in Story Cost of goods purchased Change in inventory Amortization expense Income taxes and other expenses Dividends paid Total debits Accounts payable Long-term debt Common shares Retained earnings, beginning Sales Other revenues Prospect $ 190,000 201,000 632,000 760,000 900,000 728,000 680,400 2,397,000 98,000 202,000 903,000 376,800 $ 8,068,200 $ 484,000 252, 600 1,200,000 571,200 5,170,000 112,000 2,422,000 (49,000) 101,000 451,000 247,000 $5,271,000 $ 334,000 768,000 500,000 279,000 3,390,000 Other revenues Equity method income from Story Total credits 112,000 278,400 $8,068, 200 $5,271,000 Additional Information: Every year, goodwill is evaluated to determine if there has been a loss. The recoverable amount for Story's goodwill was valued at $99,000 at the end of Year 7 and $75,000 at the end of Year 8. Prospect's inventories contained $350,000 of merchandise purchased from Story at December 31, Year 8, and $400,000 at December 31, Year 7. During Year 8, sales from Story to Prospect were $680,000. Merchandise was priced at the same profit margin as applicable to other customers. Prospect owed $188,000 to Story at December 31, Year 8, and $196,000 at December 31, Year 7. On July 1, Year 5, Story purchased a building from Prospect for $788,000. The building had an original cost of $838,000 and a carrying amount of $638,000 on Prospect's books on July 1, Year 5. Story estimated the remaining life of the building was 15 years at the time of the purchase from Prospect. Story rented another building from Prospect throughout the year for $3,000 per month. Prospect uses the equity method of accounting for its long-term investments. Both companies pay tax at the rate of 40%. Ignore deferred income taxes when allocating and recording changes to the acquisition differential. Required: (a) Prepare a consolidated income statement for the year ended December 31, Year 8. (Enter your answers in thousands of dollars. Round your "Shareholders of Prospect" and "Non-controlling interest" answers to 1 decimal place. Input all values as positive Required: (a) Prepare a consolidated income statement for the year ended December 31, Year 8. (Enter your answers in thousands of dollars. Round your "Shareholders of Prospect" and "Non-controlling interest" answers to 1 decimal place. Input all values as positive numbers.) $ 7,880 40 Consolidated Income Statement December 31, Year 8. Sales Other revenues Total revenues $ Cost of goods purchased $ Change in inventory Amortization expense Goodwill impairment Income tax and other expenses 7,920 4,139 34 $ 4,173 Total expenses Consolidated net income Attributable to: Shareholders of RAV Non-controlling interest (b) Prepare the current assets; property, plant, and equipment; and intangible assets sections of the consolidated balance sheet at December 31, Year 8. (Enter your answers in thousands of dollars.) Consolidated Balance Sheet December 31, Year 8. Current assets Cash Accounts receivable Inventory Property, plant & equipment Land Building - net Equipment - net Intangible assets Internet domain names Goodwill (c) Calculate non-controlling interest on the consolidated balance sheet at December 31, Year 7. (Enter your answer in thousands of dollars. Round your answer to 1 decimal place. Omit $ sign in your response.) Non-controlling interest $