On January 1, Year 4, Handy Company (Handy) purchased 70% of the outstanding common shares of Dandy Limited (Dandy) for $7,000. On that date, Dandy's shareholders' equity consisted of common shares of $270 and retained earnings of $4,700. The financial statements for Handy and Dandy for Year 9 were as follows: BALANCE SHEETS At December 31, Year 9 Handy Dandy Cash $ 1,360 $ 800 Accounts receivable 2,820 1,070 Inventory 3,420 2,600 Property, plant, and equipment-net 4,360 3,030 Investment in Dandy 7,000 Total $18,960 $ 7,500 Current liabilities $ 4,380 $ 640 Long-term liabilities 3,120 1,250 Common shares 1,020 270 Retained earnings 10,440 5,340 Total $18,960 $ 7,500 Dandy $ 7,540 3,320 4,220 STATEMENTS OF INCOME AND RETAINED EARNINGS For year ended December 31, Year 9 Handy Sales $22,000 Cost of sales 14,840 Gross profit 7,160 Other revenue 1,640 Selling and administrative expenses (860 Other expenses (5,340) Income before income taxes 2,600 Income tax expense 800 Net income 1,800 Retained earnings, beginning of year 10,440 Dividends paid (1,800) Retained earnings, end of year $10,440 (440) (2,060) 1, 720 680 1,040 5,200 (900) $ 5,340 Additional Information In negotiating the purchase price at the date of acquisition, it was agreed that the fair values of all of Dandy's assets and liabilities were equal to their carrying amounts, except for the following: Inventory Equipment Carrying Amount $2,120 2,520 Va/ue $2,220 3,020 . Both companies use FIFO to account for their inventory and the straight-line method for amortizing their property, plant, and equipment. Dandy's equipment had a remaining useful life of 10 years at the acquisition date. Goodwill is not amortized on a systematic basis. However, each year, goodwill is evaluated to determine if there has been a permanent impairment. It was determined that goodwill on the consolidated balance sheet should be reported at its recoverable amount of $1,120 on December 31, Year 8, and $1,030 on December 31, Year 9. During Year 9, inventory sales from Dandy to Handy were $4,100. Handy's inventories contained merchandise purchased from Dandy for $1,600 at December 31, Year 8, and $2,700 at December 31, Year 9. Dandy earns a gross margin of 50% on its intercompany sales. . On January 1, Year 5, Handy sold some equipment to Dandy for $1,200 and recorded a gain of $200 before taxes. This equipment had a remaining useful life of eight years at the time of the purchase by Dandy. Handy charges $50 per month to Dandy for consulting services and has been doing so throughout Years 8 and 9. Handy uses the cost method of accounting for its long-term investment. . Both companies pay taxes at the rate of 40%. Amortization expense is grouped with selling and administrative expenses, and impairment losses are grouped with other expenses. Required: (a) Prepare a consolidated statement of income for the year ended December 31, Year 9. (Input all values as positive numbers. Omit $ sign in your response.) $ Handy Company Consolidated Income Statement Year 9 Sales Cost of sales Gross profit Other revenue Selling and administrative expense Other expenses Income before income taxes Income tax expense Net income Attributable to: Shareholders of Handy Non-controlling interest $ (5-1) Calculate consolidated retained earnings at January 1, Year 9. (Omit $ sign in your response.) Consolidated retained earnings (b-2) Prepare a consolidated statement of retained earnings for the year ended December 31, Year 9. (Amounts to be deducted should be indicated by a minus sign. Omit $ sign in your response.) Handy Company Consolidated Statement of Retained Earnings For the Year Ended December 31, Year 9 Retained earnings, Jan. 1 Add: Net income Less: Dividends paid Retained earnings, Dec. 31 V (c) Not available in Connect. (d) Calculate goodwill impairment loss and non-controlling interest on the consolidated income statement for the year ended December 31, Year 9, under the identifiable net assets method. (Input all values as positive numbers. Omit $ sign in your response.) Goodwill impairment loss Non-controlling interest (e) Prepare the consolidated financial statements using the worksheet approach. (Values in the first two columns and last column (the "parent", "subsidiary" and "consolidated" balances) that are to be deducted should be indicated with a minus sign, while all values in the "Entry" columns should be entered as positive values. For accounts where multiple adjusting entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet. Leave no cells blank - be certain to enter "0" wherever required. Omit $ sign in your response.) HANDY LTD. CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, YEAR 9 Entries Handy Dandy Dr Cr. Consolidated $1 $ $1 $ $ Year 9 income statements Sales Cost of sales Gross profit Other revenue Selling and administrative expense Other expenses Income before income taxes Income tax expense Profit Attributable to: Non-controlling interest Shareholders of Handy Total Year 9 retained earnings statements Balance, January 1 Profit $ Dividends Balance, December 31 Total Balance Sheet, December 31, Year 9 Cash Accounts receivable Inventory Property, plant, and equipment-net Goodwill Deferred income tax asset Investment in Dandy Total Current liabilities Long-term liabilities Common shares Retained earnings Non-controlling interest Total $ $