On January 1, Year 4, Grant Corporation bought 12,000 (80%) of the outstanding common shares of Lee Company for $105,000 cash. Lee's shares were trading for $7 per share on the date of acquisition. On that date, Lee had $37,500 of common shares outstanding and $45,000 retained earnings. Also on that date, the carrying amount of each of Lee's identifiable assets and liabilities was equal to its fair value except for the following: Inventory Patent Carrying Amount $75,000 15,000 Fair Value $82,500 30,000 The patent had an estimated useful life of five years at January 1, Year 4, and the entire inventory was sold during Year 4. Grant uses the cost method to account for its investment. The following are the separate-entity financial statements of Grant and Lee as at December 31, Year 7: Assets BALANCE SHEETS At December 31, Year 7 Cash Accounts receivable Inventory Investment in Lee Equipment, net Patent, net Liabilities and Shareholders' Equity Accounts payable Other accrued liabilities Income taxes payable Common shares Retained earnings Grant Lee $ 7,500 $ 27,000 277,500 123,000 465,000 150,000 105,000 345,000 307,500 3,000 $1,200,000 $ 610,500 $ 285,000 $292,500 90,000 75,000 120,000 108,000 255,000 37,500 450,000 97,500 $1,200,000 $ 610,500 Sales INCOME STATEMENT Year ended December 31, Year 7 Grant Cost of goods sold Gross margin Distribution expense Other expenses Income tax expense Net income Additional Information $ 1,350,000 (510,000) Lee $ 540,000 (360,000) 840,000 180,000 (45,000) (37,500) (270,000) (84,000) (180,000) (24,000) $ 345,000 $ 34,500 The recoverable amount for goodwill was determined to be $15,000 on December 31, Year 7. The goodwill impairment loss occurred in Year 7. Grant's accounts receivable contains $45,000 owing from Lee. Amortization expense is grouped with distribution expenses and impairment losses are grouped with other expenses. Required: (a) Calculate consolidated retained earnings at December 31, Year 7. (Input all values as positive numbers. Omit $ sign in your response.) Calculation of consolidated retained earnings - Dec 31, Year 7 Retained earnings - Grant Retained earnings - Lee Retained earnings on acquisition Increase Grant's share Less: Changes to acquisition differential +A +A (b) Prepare consolidated financial statements for Year 7. (Input all values as positive numbers.) Grant Corporation Consolidated Income Statement Year ended December 31, Year 7 Gross margin Total Attributable to: Grant's shareholders Non-controlling interest Grant Corporation Consolidated Balance Sheet - December 31, Year 7 Assets Liabilities and Equity