On January 1, Year 4, Par purchased 75% of the common shares of Sub for $4,200,000. On that date, Sub had common shares of $1,000,000 and retained earnings of $2,300,000. The fair values were equal to carrying values for all its net assets except the following: Inventory carrying value was greater than the fair value by $120,000; property, plant and equipment carrying value was less than the fair value by $800,000 (remaining useful life of 8 years), and note payable carrying value was less than the fair value by 90,000 (8 years to maturity) on Subs books. The financial statements for Par and Sub for the year ended December 31, Year 8 were as follows: Statements of Income For the year ended December 31, Year 8 Par Sub Sales $ 5,000,000 $ 4,400,000 Cost of sales 3,200,000 2,920,000 Gross profit 1,800,000 1,480,000 Other income 410,000 230,000 Administration expense 100,000 110,000 Depreciation and amortization expense 700,000 500,000 Other expenses 640,000 490,000 Income tax expense 340,000 220,000 Net income 430,000 390,000 Statements of Retained Earnings For the year ended December 31, Year 8 Retained earnings, beginning 4,000,000 3,300,000 Net income 430,000 390,000 Dividends paid (140,000) (100,000) Retained earnings, end $ 4,290,000 $ 3,590,000 Balance Sheets December 31, Year 8 Par Sub Current assets $ 1,400,000 $ 1,100,000 Note receivable 500,000 450,000 Inventory 2,400,000 1,600,000 *Property, plant and equipment 5,390,000 3,690,000 Accumulated depreciation 2,500,000 1,150,000 Investment in Sub 4,200,000 ----- Total assets $ 11,390,000 $ 5,690,000 *Includes land Current liabilities $ 1,300,000 $ 600,000 Notes payable 800,000 500,000 Common shares 5,000,000 1,000,000 Retained earnings 4,290,000 3,590,000 Total $ 11,390,000 $ 5,690,000 453 2023W1 A3 Additional information 1. Each year, goodwill is evaluated to determine if there has been a permanent impairment. Goodwill impairment was $500,000 in Year 6 and the recoverable value of goodwill December 31, Year 8 was $800,000. 2. During December Year 8, Par purchased merchandise from Sub for $800,000. Of this merchandise, 65% was resold by Par by December 31, Year 8. In December 31, Year 7, the inventories of Par contained $410,000 of merchandise purchased from Sub. Sub earns a gross margin of 30% on its sales to Par. 3. On March 1, Year 6, Sub sold land to Par for $700,000. Sub purchased the land on January 1, Year 5 for $510,000. In Year 8, Par sold 60% of this land to an outsider. 4. During Year 8, Sub charged Par $30,000 for professional services of which $12,000 was owing at December 31, Year 8 5. On July 1, Year 7, Sub sold a machine to Par for $315,000. Sub had paid $340,000 for this machine on July 1, Year 5 and had been depreciating the machine on a straight-line basis over 8 years. 6. Par accounts for its investment in Sub using the cost method. Both companies pay income taxes at the rate of 25%. Required: Show all work and round to the nearest dollar a) Prepare all 3 schedules b) Calculate Consolidated Net Income for Year 8 c) Calculate Consolidated Retained Earnings January 1, Year 8 d) Prepare the 3 Consolidated financial statements for Year 8 in good format e) Prepare the working paper journal entry(s) for the intercompany sale of inventory in Year 8 Hints: Goodwill = $1,710,000; AD left Dec. 31, Year 8 = $1,066,250; Consolidated NI = $368,500; Total Consolidated assets $13,814,250 Note: there are 2 separate lines for Equipment less accumulated depreciation on Cons B/S hence do not show a net number. Notes Only 4 columns for AD amort./loss schedule (in proper sequence) Good format so include proper title with proper dates All calculations must be shown (i.e. for NCI, Cons. RE, etc) All words on the consolidated FSs must be written out fully All #s must be given in brackets on Cons. Statements along with totals If using excel, answer the question in one sheet/tab only so markers can follow the references