On January $1,$ Year $4,$ A Company purchased $70\%$ of the outstanding common shares of B Limited for $$13,300.$ On that date, B$$s shareholders$$ equity consisted of common shares of $$1,250$ and retained earnings of $$6,500.$

$$ In negotiating the purchase price at the date of acquisition, it was agreed that the fair values of all of B$$s assets and liabilities were equal to their carrying amounts, except for the following:

Carrying Amount Fair Value

Inventory $$2,300$ $$2,400$

Equipment $2,7003,200$

The financial statements for A and B for Year $9$ were as follows:

BALANCE SHEETS

At December $31,$ Year $9$

A B

Cash $ $1,540$ $ $980$

Accounts receivable $4,0002,250$

Inventory $3,6004,250$

Property, plant, and equipment$$net $4,5403,210$

Investment in B $13,300-$

Total $ $26,980$ $ $10,690$

Current liabilities $ $4,560$ $ $680$

Long$-$term liabilities $4,3001,630$

Common shares $7,5001,250$

Retained earnings $10,6207,130$

Total $ $26,980$ $ $10,690$

STATEMENTS OF INCOME AND RETAINED EARNINGS

For year ended December $31,$ Year $9$

A B

Sales $ $22,900$ $ $8,440$

Cost of sales $15,2003,680$

Gross profit $7,7004,760$

Other revenue $1,820$

Selling and administrative expenses $(1,040)(620)$

Other expenses $(5,520)(2,240)$

Income before income taxes $2,9601,900$

Income tax expense $1,000840$

Net income $1,9601,060$

Retained earnings, beginning of year $10,6207,050$

Dividends paid $(1,960)(980)$

Retained earnings, end of year $ $10,620$ $ $7,130$

Other Information:

$$ Both companies use FIFO to account for their inventory and the straight$-$line method for amortizing their property, plant, and equipment. B$$s equipment had a remaining useful life of $10$ years at the acquisition date.

$$ Goodwill is not amortized on a systematic basis. However, each year, goodwill is evaluated to determine if there has been a permanent impairment. It was determined that goodwill on the consolidated balance sheet should be reported at its recoverable amount of $$1,300$ on December $31,$ Year $8,$ and $$1,110$ on December $31,$ Year $9.$

$$ During Year $9,$ inventory sales from B to A were $$5,900.$ A$$s inventories contained merchandise purchased from B for $$3,400$ at December $31,$ Year $8,$ and $$4,500$ at December $31,$ Year $9.$ B earns a gross margin of $50\%$ on its intercompany sales.

$$ On January $1,$ Year $5,$ A sold some equipment to B for $$3,000$ and recorded a gain of $$360$ before taxes. This equipment had a remaining useful life of eight years at the time of the purchase by B$.$

$$ A charges $$50$ per month to B for consulting services and has been doing so throughout Years $8$ and $9.$

$$ A uses the cost method of accounting for its long$-$term investment.

$$ Both companies pay taxes at the rate of $40\%.$

$$ Amortization expense is grouped with selling and administrative expenses, and impairment losses are grouped with other expenses.

Required:

$($a$)$ Prepare the schedule showing the calculation and allocation of the acquisition differential at the date of A$$s purchase of B$$s shares on January $1,$ year $4.$

$($b$)$ Prepare a schedule showing the annual amortizations in years $4$ to $9$ of the fair value adjustments that occurred at the purchase date and the adjustments each year to goodwill for the annually determined permanent impairments of goodwill.

$($c$)$ Prepare a calculation of consolidated net income for year $9.$

$($d$)$ Prepare the consolidating journal entries required for year $9.$

$($e$)$ Prepare the Consolidated Income Statement for Year $9.$

$($f$)$ Prepare the Consolidated Balance Sheet as at December $31,$ Year $9.$