On January $1,$ Year $4,$ Grant Corporation bought $48,000(80\%)$ of the outstanding common shares of Devy Company for $$420,000$ cash. Devy$$s shares were trading for $$7$ per share on the date of acquisition. On that date, Devy had $$150,000$ of common shares outstanding and $$180,000$ retained earnings. Also on that date, the carrying amount of each of Devy$$s identifiable assets and liabilities was equal to its fair value except for the following:

Carrying Amount Fair Value

Inventory $ $300,000$ $ $330,000$

Patent $60,000120,000$

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 Devy as at December $31,$ Year $7$:

BALANCE SHEETS

At December $31,$ Year $7$

Grant Devy

Assets

Cash $ $30,000$ $ $108,000$

Accounts receivable $1,110,000492,000$

Inventory $1,860,000600,000$

Investment in Devy $420,000$

Equipment $($net$)1,380,0001,230,000$

Patent $($net$)12,000$

$ $4,800,000$ $ $2,442,000$

Liabilities and Shareholders$$ Equity

Accounts payable $ $1,140,000$ $ $1,170,000$

Other accrued liabilities $360,000300,000$

Income taxes payable $480,000432,000$

Common shares $1,020,000150,000$

Retained earnings $1,800,000390,000$

$ $4,800,000$ $ $2,442,000$

INCOME STATEMENT

Year ended December $31,$ Year $7$

Grant Devy

Sales $ $5,400,000$ $ $2,160,000$

Cost of goods sold $(2,040,000)(1,440,000)$

Gross margin $3,360,000720,000$

Distribution expense $(180,000)(150,000)$

Other expenses $(1,080,000)(336,000)$

Income tax expense $(720,000)(96,000)$

Net income $ $1,380,000$ $ $138,000$

Additional Information

The recoverable amount for goodwill was determined to be $$60,000$ on December $31,$ Year $7.$ The goodwill impairment loss occurred in Year $7.$

Grant$$s accounts receivable contains $$180,000$ owing from Devy.

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 $ and $\%$ sign in your response.$)$

Calculation of consolidated retained earnings $$ Dec $31,$ Year $7$

Retained earnings $$ Grant $

Retained earnings $$ Devy $

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.$)$