On January $1,$ Year $4,$ Grant Corporation bought $5,000(80\%)$ of the outstanding common shares of Devy Company for $$43,750$ cash. Devy$$s shares were trading for $$7$ per share on the date of acquisition. On that date, Devy had $$15,625$ of common shares outstanding and $$18,750$ retained earnings. Also on that date, the carrying amount of each of Devy$$s identifiable assets and liabilities was equal to its fair value except for the following:

Carrying Amount Fair Value

Inventory $ $31,250$ $ $34,375$

Patent $6,25012,500$

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 $ $3,125$ $ $11,250$

Accounts receivable $115,62551,250$

Inventory $193,75062,500$

Investment in Devy $43,750$

Equipment $($net$)143,750128,125$

Patent $($net$)1,250$

$ $500,000$ $ $254,375$

Liabilities and Shareholders$$ Equity

Accounts payable $ $118,750$ $ $121,875$

Other accrued liabilities $37,50031,250$

Income taxes payable $50,00045,000$

Common shares $106,25015,625$

Retained earnings $187,50040,625$

$ $500,000$ $ $254,375$

INCOME STATEMENT

Year ended December $31,$ Year $7$

Grant Devy

Sales $ $562,500$ $ $225,000$

Cost of goods sold $(212,500)(150,000)$

Gross margin $350,00075,000$

Distribution expense $(18,750)(15,625)$

Other expenses $(112,500)(35,000)$

Income tax expense $(75,000)(10,000)$

Net income $ $143,750$ $ $14,375$

Additional Information

The recoverable amount for goodwill was determined to be $$6,250$ on December $31,$ Year $7.$ The goodwill impairment loss occurred in Year $7.$

Grant$$s accounts receivable contains $$18,750$ 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.$)$