On January $1,$ Year $1,$ Major Inc. purchased $60\%$ of the outstanding common shares of Minor Ltd$.$ for $$105,000.$ On that date, Minor Ltd$.$s shareholders$$ equity consisted of common shares $$15,000$ and retained earnings of $$42,000.$ The financial statements for Major Inc. and Minor Ltd$.$ for Year $5$ were as follows:

Statement of Financial Position

As of December $31,$ Year $5$

Major Inc. Minor Ltd$.$

Cash $ $39,400$ $ $7,600$

Inventory $172,50033,800$

Property, plant, and equipment $($net$)383,60083,600$

Land $150,000125,000$

Investment in Sub Inc. $105,000-$

Total assets $ $850,500$ $ $250,000$

Current liabilities $ $77,500$ $ $45,400$

Long$-$term debt $150,000100,000$

Common shares $200,00015,000$

Retained earnings $423,00089,600$

Total liabilities and equities $ $850,500$ $ $250,000$

Statement of Income and Retained Earnings

For the year ended December $31,$ Year $5$

Major Inc. Minor Ltd$.$

Sales $ $400,600$ $ $102,500$

Cost of goods sold $198,50060,500$

Gross profit $202,10042,000$

Selling and administrative expense $58,10021,200$

Other revenue $40,00032,000$

Other expenses $20,3008,500$

Income before income taxes $163,70044,300$

Income tax expense $40,80011,300$

Net Income $122,90033,000$

Retained earnings, beginning of year $350,10076,600$

Dividends declared and paid $50,00020,000$

Retained earnings, end of year $ $423,000$ $ $89,600$

Additional Information

$1)$ At the date of acquisition, it was agreed that the fair values of all Minor Ltd$.$s assets and liabilities were equal to their carrying amounts, except for the following:

Carrying amount Fair Market Value

Inventory $ $15,300$ $ $23,600$

Equipment $65,00098,000$

$2)$ Both companies use FIFO to account for their inventory and the straight$-$line method for amortizing their property, plant, and equipment. Minor Ltd$.$s equipment had a remaining useful life of $20$ years at the acquisition date.

$3)$ Each year, goodwill is evaluated to determine if there has been a permanent impairment. It was determined that the following amounts were impaired since the recoverable amount is less than the carrying amounts:

$$ Year $1-$ $$10,500$; and

$$ Year $5-$ $$5,200.$

$4)$ During Year $5,$ inventory sales from Minor Ltd$.$ to Major Inc. were $$33,000.$ Major Inc.$$s inventories contained merchandise purchased from Minor Ltd$.$ for $$10,000$ at December $31,$ Year $4,$ and $$8,000$ at December $31,$ Year $5.$ Minor Ltd$.$ earns a gross margin of $35\%$ on its intercompany sales.

$5)$ During Year $5,$ inventory sales from Major Inc. to Minor Ltd$.$ were $$41,000.$ Minor Ltd$$s inventories contained merchandise purchased from Major Inc. valued at $$12,000$ at December $31,$ Year $4,$ and $$15,000$ at December $31,$ Year $5.$ Major Inc. earns a gross margin of $25\%$ on its intercompany sales.

$5)$ In Year $5,$ Minor Ltd$.$ charged Major Inc. $$11,000$ for consulting services that has been performed by Minor Ltd$.$ Major Inc. recorded this charges in its $$Other Expenses$$ account, and Minor Ltd$.$ recorded the fees in its $$Other Revenue$$ account.

$6)$In Year $5,$ Major Inc. sold land that originally cost $$100,000$ to Major Inc. for $$125,000.$ The land is still owned by Minor Ltd$.$

$7)$ Major Inc. uses the cost method of accounting for its long$-$term investment.

$8)$ Both companies pay taxes at the rate of $20\%.$

$9)$ Depreciation and amortization expenses are grouped with selling and administrative expenses.

Required:

a$)$ Calculate and show the supporting calculation of the goodwill that was inherited in the purchase price of Minor Ltd$.(5$ marks$)$

b$)$ Calculate and show the schedule of the amortization of acquisition differential $($including goodwill impairment$)$ and intercompany transactions that will be adjusted in year $2015.(10$ marks$)$

c$)$ Calculate and show the supporting calculation of the consolidated net income for the year ended December $31,$ Year $5$ and prepare a consolidated statement of income for the year ended December $31,$ Year $5.(19\mathrm{.}5$ marks$)$

d$)$ Calculate only the balance of the consolidated retained earnings and NCI as of December $31,$ Year $5.(8$ marks$)$

e$)$ Prepare a consolidated statement of financial position as at December $31,$ Year $5.$ Show supporting calculations. $(12\mathrm{.}5$ marks$)$