On January 1, Year 4, Cyrus Inc. paid $915,000 in cash to acquire all of the ordinary shares of Fazli Company. On that date, Fazlis retained earnings were $201,000. All of Fazlis assets and liabilities had fair values equal to carrying amounts except for an investment in bonds, which was worth $13,012 more than carrying amount and will mature on December 31, Year 8. The recoverable amount for goodwill was $200,000 at the end of Years 4 and 5.

In Year 4, Cyrus reported net income from its own operations (exclusive of any income from Fazli) of $126,000 and declared no dividends. In Year 4, Fazli reported net income of $91,000 and paid a $41,000 cash dividend. Cyrus uses the cost method to report its investment in Fazli and uses the effective interest method to amortize premiums or discounts on investment in bonds. The amortization of the acquisition differential pertaining to the investment in bonds was $2,389 in Year 4 and $2,492 in Year 5.

The financial statements for Cyrus and Fazli for the year ended December 31, Year 5, were as follows:

(a) Prepare a schedule of changes to the acquisition differential for Years 4 and 5.

(b) Calculate investment in bonds and goodwill for the consolidated balance sheet at the end of Year 5

(c) Calculate investment income from Fazli and investment in Fazli account balances for Cyruss separate entity financial statements for Year 5, assuming Cyrus uses the: (Omit $ sign in your response.) (i) Cost method (ii) Equity method

(d) What is Cyruss January 1, Year 5, retained earnings account balance on its separate entity financial statements assuming Cyrus accounts for its investment in Fazli using the:

(i) Cost method? (ii) Equity method?

(e) What are consolidated retained earnings at January 1, Year 5, assuming Cyrus accounts for its investment in Fazli using the:

(i) Cost method? (ii) Equity method?

$ $ $ $ $ $ Cyrus 938,000 (682,000) 256,000 824,000 256,000 (105,000) 975,000 724,000 915,000 Fazli 854,000 (718,000 136,000 255,000 136,000 (43,000) 348,000 324,000 $ $ $ Revenues and investment income Expenses Profit Retained earnings, 1/1/Year 5 Profit Dividends paid Retained earnings, 12/31/Year 5 Equipment (net) Investment in Fazli Investment in bonds Receivables and inventory Cash Total assets Ordinary shares Retained earnings Liabilities Total equities and liabilities $ 424,000 101,000 $ 2,164,000 $ 568,000 975,000 621,000 $ 2,164,000 304,000 494,000 157,000 $ 1,279,000 $ 492,000 348,000 439,000 $ 1,279,000 $ $ $ $ $ $ Cyrus 938,000 (682,000) 256,000 824,000 256,000 (105,000) 975,000 724,000 915,000 Fazli 854,000 (718,000 136,000 255,000 136,000 (43,000) 348,000 324,000 $ $ $ Revenues and investment income Expenses Profit Retained earnings, 1/1/Year 5 Profit Dividends paid Retained earnings, 12/31/Year 5 Equipment (net) Investment in Fazli Investment in bonds Receivables and inventory Cash Total assets Ordinary shares Retained earnings Liabilities Total equities and liabilities $ 424,000 101,000 $ 2,164,000 $ 568,000 975,000 621,000 $ 2,164,000 304,000 494,000 157,000 $ 1,279,000 $ 492,000 348,000 439,000 $ 1,279,000