On January 1, Year 4, Grant Corporation bought 16,000 (80%) of the outstanding common shares of Lee Company for $140,000 cash. Lees shares were trading for $7 per share on the date of acquisition. On that date, Lee had $50,000 of common shares outstanding and $60,000 retained earnings. Also on that date, the carrying amount of each of Lees identifiable assets and liabilities was equal to its fair value except for the following:

	Carrying Amount			Fair Value
Inventory	$	100,000		$	110,000
Patent		20,000			40,000

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:

BALANCE SHEETS
At December 31, Year 7
		Grant			Lee
Assets
Cash	$	10,000		$	36,000
Accounts receivable		370,000			164,000
Inventory		620,000			200,000
Investment in Lee		140,000
Equipment, net		460,000			410,000
Patent, net					4,000
	$	1,600,000		$	814,000
Liabilities and Shareholders Equity
Accounts payable	$	380,000		$	390,000
Other accrued liabilities		120,000			100,000
Income taxes payable		160,000			144,000
Common shares		340,000			50,000
Retained earnings		600,000			130,000
	$	1,600,000		$	814,000

INCOME STATEMENT
Year ended December 31, Year 7
		Grant				Lee
Sales	$	1,800,000			$	720,000
Cost of goods sold		(680,000	)			(480,000	)
Gross margin		1,120,000				240,000
Distribution expense		(60,000	)			(50,000	)
Other expenses		(360,000	)			(112,000	)
Income tax expense		(240,000	)			(32,000	)
Net income	$	460,000			$	46,000

Additional Information

• The recoverable amount for goodwill was determined to be $20,000 on December 31, Year 7. The goodwill impairment loss occurred in Year 7.
• Grants accounts receivable contains $60,000 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
			$

(b) Prepare consolidated financial statements for Year 7. (Input all values as positive numbers.)