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 $370 and retained earnings of $5,700.

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

BALANCE SHEETS
At December 31, Year 9
	Handy			Dandy
Cash	$	1,460		$	900
Accounts receivable		2,920			1,170
Inventory		3,520			3,040
Property, plant, and equipmentnet		4,460			3,130
Investment in Dandy		7,000
Total	$	19,360		$	8,240
Current liabilities	$	4,480		$	320
Long-term liabilities		3,220			1,350
Common shares		1,120			370
Retained earnings		10,540			6,200
Total	$	19,360		$	8,240

STATEMENTS OF INCOME AND RETAINED EARNINGS
For year ended December 31, Year 9
		Handy			Dandy
Sales	$	22,500		$	8,040
Cost of sales		15,040			3,520
Gross profit		7,460			4,520
Other revenue		1,740
Selling and administrative expenses		(960			(540	)
Other expenses		(5,440	)		(2,160	)
Income before income taxes		2,800			1,820
Income tax expense		1,000			760
Net income		1,800			1,060
Retained earnings, beginning of year		10,540			6,040
Dividends paid		(1,800	)		(900	)
Retained earnings, end of year	$	10,540		$	6,200

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	$2,220	$2,320
Equipment	2,620	3,120

• 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 $1,220 on December 31, Year 8, and $1,070 on December 31, Year 9.
• During Year 9, inventory sales from Dandy to Handy were $5,100. Handys inventories contained merchandise purchased from Dandy for $2,600 at December 31, Year 8, and $3,700 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 $2,200 and recorded a gain of $280 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
	$

(b-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
(Click to select) Retained earnings, Jan. 1 Retained earnings, Dec. 31	$
(Click to select) Add: Net income Less: Net loss
(Click to select) Add: Dividends paid Less: Dividends paid
(Click to select) Retained earnings, Jan. 1 Retained earnings, Dec. 31	$

(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
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 equipmentnet
Goodwill
Deferred income tax asset
Investment in Dandy
Total	$	$			$
Current liabilities	$	$			$
Long-term liabilities
Common shares
Retained earnings
Non-controlling interest
Total	$	$			$
			$	$