On January 1, Year 4. Grant Corporation bought 28.000 (80%) of the outstanding common shares of Lee Company for $245,000 cash. Lee's shares were trading for $7 per share on the date of acquisition. On that date, Lee had $87,500 of common shares outstanding and $105,000 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: Carrying Amount Foir Value Inventory $175,000 $192,5ee Patent 35, eee 70,eee 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 Accounts receivable Inventory Investment in Lee Equipment, net Patent, net $ 17,500 647,580 1,085.000 245,000 885,000 63, eee 287, eee 350,000 717,500 7,600 $1,424,500 $2,888,888 Liabilities and Shareholders' Equity Accounts payable Other accrued liabilities Income taxes payable Connon shares Retained earnings $ 665,000 210,880 288,888 595,000 1,050,000 $2,800,000 $ 682,500 175,000 252, eee 87,500 227,500 $1,424,500 INCOME STATEMENT Year ended December 31, Year 7 Grant Sales $ 3,150,000 Cost of goods sold (1,190, eee) Gross margin 1,960, een Distribution expense (185,00) Other expenses (630,000) Income tax expense (420,000) Net income $ 885, eee Lee $ 1,260,880 (B40, Bee) 420,00 (87.5ee) (196,680) (56,000) $ 80,560 Additional Information The recoverable amount for goodwill was determined to be $35,000 on December 31, Year 7. The goodwill impairment loss occurred in Year 7 Grant's accounts recevable contains $105.000 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 $ X (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 S 0 Total 0 S S 0 Attributable to Total S 0 CE S 0 Attributable to Grant's shareholders Non-controlling interest S 0 Grant Corporation Consolidated Balance Sheet - December 31, Year 7 Assets 0 Liabilities and Equity $ 0
