On January 1, Year 7, Prudent purchased 75% of the outstanding shares of Safe for $1,287,000. At that time, Safe`s assets and liabilities had the following book and fair values.

During Year 7, Prudence sold goods to Safe for $130,000. These goods cost Prudence $85,000. Safe sold 60% of these goods during Year 7. Also during Year 7, Safe sold goods to Prudence for $90,000, earning a gross profit of 40%. Prudence had 20% of these goods in its Year 7 ending inventory. The tax rate for both companies is 30%. On December 31, Year 7, Port determined that there was a $3000 goodwill impairment.

Both companies use straight-line depreciation.

Prudence accounts for Safe using the Fair Value Enterprise method (Entity theory) and cost methods.

Required:

Prepare all the calculations required to prepare consolidated financial statements.

Prepare a consolidated income statement that includes a section below net income attributing income to shareholders of Prudence and NCI shareholders. Prepare a consolidated balance sheet for Year 7. Prepare statements in good form

January 1, Year 7 CashAccountsreceivableInventoryCapitalassetsAccountspayableCommonsharesRetainedearningsBookvalue$140,000350,000345,0001,000,000$1,835,000$255,000300,0001,280,000$1,835,000Fairvalue$140,000350,000351,0001,070,000$1,911,000$255,000 Capital assets have a 10 year remaining life. Balance Sheets December 31, Year 7 \begin{tabular}{lrr} & Prudent & Safe \\ Cash & $78,000 & $160,000 \\ Accounts receivable & 350,000 & 410,000 \\ Inventory & 420,000 & 564,000 \\ Capital assets & 2,075,000 & 950,000 \\ Investment in Snow & 1,287,000 & - \\ & $4,210,000 & $2,084,000 \\ Accounts payable & & \\ Deferred income taxes & $55,000 & $377,000 \\ Long-term debt & 75,000 & 60,000 \\ Common shares & 900,000 & - \\ Retained earnings & 600,000 & 300,000 \\ & 2,580,000 & 1,347,000 \\ \cline { 4 - 4 } & $4,210,000 & $2,084,000 \\ \hline \end{tabular} Statements of Income and Retained Earnings Year ended December 31, Year 7 Sales Cost of goods sold Other expenses Interest on long-term debt Depreciation 70,00050,000 Other income Net income before tax Income tax Net income after tax 124,50063,000270,50067147,00060 Retained earnings, January 1 , Year 7 Dividends declared \begin{tabular}{rr} 2,459,500 & 1,280,000 \\ (150,000) & (80,000) \\ \hline \end{tabular} Retained earnings, December 31 , Year 7 $2,580,000$1,347,000