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, Dandys shareholders equity consisted of common shares of $310 and retained earnings of $5,100 The financial statements for Handy and Dandy for Year 9 were as follows BALANCE SHEETS At December 31, Year 9 Handy Dandy Cash $ 1,400 $ 840 Accounts receivable 2,860 1,110 Inventory 3,460 2,640 Property, plant, and equipmentnet 4,400 3,070 Investment in Dandy 7,000 Total $ 19,120 $ 7,660 Current liabilities $ 4,420 $ 650 Long term liabilities 3,160 1,290 Common shares 1,060 310 Retained earnings 10,480 5,410 Total $ 19,120 $ 7,660 STATEMENTS OF INCOME AND RETAINED EARNINGS For year ended December 31, Year 9 Handy Dandy Sales $ 22,200 $ 7,740 Cost of sales 14,920 3,400 Gross profit 7,280 4,340 Other revenue 1,680 Selling and administrative expenses (900 (480 ) Other expenses (5,380 ) (2,100 ) Income before income taxes 2,680 1,760 Income tax expense 900 700 Net income 1,780 1,060 Retained earnings, beginning of year 10,480 5,240 Dividends paid (1,780 ) (890 ) Retained earnings, end of year $ 10,480 $ 5,410 Additional Information In negotiating the purchase price at the date of acquisition, it was agreed that the fair values of all of Dandys assets and liabilities were equal to their carrying amounts, except for the following Carrying Amount Fair Value Inventory $2,160 $2,260 Equipment 2,560 3,060 Both companies use FIFO to account for their inventory and the straight line method for amortizing their property, plant, and equipment Dandys 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 $1,160 on December 31, Year 8, and $1,040 on December 31, Year 9 During Year 9, inventory sales from Dandy to Handy were $4,500 Handys inventories contained merchandise purchased from Dandy for $2,000 at December 31, Year 8, and $3,100 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 $1,600 and recorded a gain of $240 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 ) (b 1) Calculate consolidated retained earnings at January 1, Year 9 (Omit $ sign in your response ) (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 ) (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 )

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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, Dandys

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, Dandys shareholders equity consisted of common shares of $310 and retained earnings of $5,100.

The financial statements for Handy and Dandy for Year 9 were as follows:

BALANCE SHEETS
At December 31, Year 9
	Handy		Dandy
Cash	$	1,400	$	840
Accounts receivable		2,860		1,110
Inventory		3,460		2,640
Property, plant, and equipmentnet		4,400		3,070
Investment in Dandy		7,000
Total	$	19,120	$	7,660
Current liabilities	$	4,420	$	650
Long-term liabilities		3,160		1,290
Common shares		1,060		310
Retained earnings		10,480		5,410
Total	$	19,120	$	7,660

STATEMENTS OF INCOME AND RETAINED EARNINGS
For year ended December 31, Year 9
		Handy			Dandy
Sales	$	22,200		$	7,740
Cost of sales		14,920			3,400
Gross profit		7,280			4,340
Other revenue		1,680
Selling and administrative expenses		(900			(480	)
Other expenses		(5,380	)		(2,100	)
Income before income taxes		2,680			1,760
Income tax expense		900			700
Net income		1,780			1,060
Retained earnings, beginning of year		10,480			5,240
Dividends paid		(1,780	)		(890	)
Retained earnings, end of year	$	10,480		$	5,410

Additional Information

In negotiating the purchase price at the date of acquisition, it was agreed that the fair values of all of Dandys assets and liabilities were equal to their carrying amounts, except for the following:

	Carrying Amount	Fair Value
Inventory	$2,160	$2,260
Equipment	2,560	3,060

Both companies use FIFO to account for their inventory and the straight-line method for amortizing their property, plant, and equipment. Dandys 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 $1,160 on December 31, Year 8, and $1,040 on December 31, Year 9.
During Year 9, inventory sales from Dandy to Handy were $4,500. Handys inventories contained merchandise purchased from Dandy for $2,000 at December 31, Year 8, and $3,100 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 $1,600 and recorded a gain of $240 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.)

(b-1) Calculate consolidated retained earnings at January 1, Year 9. (Omit $ sign in your response.)

(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.)

(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.)