On January $1,$ Year $4,$ Grant Corporation bought $2,000(80\%)$ of the outstanding common shares of

Devy Company for $$17,500$ cash. Devy's shares were trading for $$7$ per share on the date of

acquisition. On that date, Devy had $$6,250$ of common shares outstanding and $$7,500$ 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:

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 $7$

Assets

Cash

Accounts receivable

Inventory

Investment in Devy

Equipment $($net$)$

Patent $($net$)$

Liabilities and Shareholders' Equity

Accounts payable

Other accrued liabilities

Income taxes payable

Common shares

Retained earnings

Grant Devy

INCOME STATEMENT

Year ended December $31,$ Year $7$

Sales

Cost of goods sold

Gross margin

Distribution expense

Other expenses

Income tax expense

Net income

Additional Information

The recoverable amount for goodwill was determined to be $$2,500$ on December $31,$ Year $7.$ The

goodwill impairment loss occurred in Year $7.$

Grant's accounts receivable contains $$7,500$ 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.$)\backslash$table$[[$Grant Corporation$],[$Consolidated Balance Sheet $-$ December $31,$ Year $7],[$Assets$,],[$Cash$,],[$Accounts receivable,$],[$Inventory$,],[$Equipment$,],[$Patent$,],[,],[,],[,],[,],[$Liabilities and Equity,$],[,],[,],[,],[,],[,],[,]]$