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 $430 and retained earnings of $6,300.

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

BALANCE SHEETS
At December 31, Year 9
	Handy			Dandy
Cash	$	1,520		$	960
Accounts receivable		2,980			1,230
Inventory		3,580			4,230
Property, plant, and equipmentnet		4,520			3,190
Investment in Dandy		7,000
Total	$	19,600		$	9,610
Current liabilities	$	4,540		$	640
Long-term liabilities		3,280			1,410
Common shares		1,180			430
Retained earnings		10,600			7,130
Total	$	19,600		$	9,610

STATEMENTS OF INCOME AND RETAINED EARNINGS
For year ended December 31, Year 9
		Handy			Dandy
Sales	$	22,800		$	8,340
Cost of sales		15,160			3,640
Gross profit		7,640			4,700
Other revenue		1,800
Selling and administrative expenses		(1,020			(600	)
Other expenses		(5,500	)		(2,220	)
Income before income taxes		2,920			1,880
Income tax expense		1,000			820
Net income		1,920			1,060
Retained earnings, beginning of year		10,600			7,030
Dividends paid		(1,920	)		(960	)
Retained earnings, end of year	$	10,600		$	7,130

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	$2,280	$2,380
Equipment	2,680	3,180

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 $1,280 on December 31, Year 8, and $1,130 on December 31, Year 9.

During Year 9, inventory sales from Dandy to Handy were $5,700. Handys inventories contained merchandise purchased from Dandy for $3,200 at December 31, Year 8, and $4,300 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 $2,800 and recorded a gain of $360 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.

(b-1) Calculate consolidated retained earnings at January 1, Year 9.

(b-2) Prepare a consolidated statement of retained earnings for the year ended December 31, Year 9.

(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.

(e) Prepare the consolidated financial statements using the worksheet approach.