On January 2, Year 4, Brady Ltd., a private company, purchased 80% of the outstanding shares of Partridge Ltd. for $4,220,000. Partridges statement of financial position and the fair values of its identifiable assets and liabilities for that date were as follows:

	Carrying Amount			Fair Value
Plant and equipment (net)	$	4,550,000		$	4,550,000
Patents (net)		1,050,000			1,560,000
Inventory		2,050,000			2,260,000
Accounts receivable		1,550,000			1,550,000
Cash		510,000			510,000
	$	9,710,000
Ordinary shares	$	2,011,000
Retained earnings		2,560,000
10% bonds payable		3,050,000			3,360,000
Accounts payable		2,089,000			2,089,000
	$	9,710,000

The patents had a remaining useful life of ten years on the acquisition date.

The bonds were issued on January 1, Year 2, and mature on December 31, Year 13. Goodwill impairment losses were as follows:

Year 4: $28,000

Year 6: $15,250

Partridge declared and paid dividends of $105,000 in Year 6.

Brady uses ASPE for reporting purposes. It elected to use the straight-line method to amortize any premium or discount on bonds payable.

On December 31, Year 6, the financial statements of the two companies were as follows:

STATEMENT OF FINANCIAL POSITION
		Brady			Partridge
Plant and equipment (net)	$	8,100,000		$	5,100,000
Patents (net)					710,000
Investment in Partridge Ltd. (equity method)		4,472,600
Inventory		4,700,000			1,950,000
Accounts receivable		1,050,000			1,350,000
Cash		410,000			610,000
	$	18,732,600		$	9,720,000
Ordinary shares	$	5,050,000		$	2,011,000
Retained earnings		6,372,000			3,189,000
Bonds payable		4,050,000			3,050,000
Accounts payable		3,260,600			1,470,000
	$	18,732,600		$	9,720,000

INCOME STATEMENTS
		Brady			Partridge
Sales	$	10,050,000		$	5,050,000
Equity method income		135,000
		10,185,000			5,050,000
Cost of goods purchased		6,940,000			2,900,000
Change in inventory		71,000			115,000
Depreciation expense		910,000			401,000
Patent amortization expense					110,000
Interest expense		485,000			305,000
Other expenses		690,000			860,000
Income taxes		610,000			155,000
		(9,706,000)			(4,846,000)
Profit	$	479,000		$	204,000

Required:

(a) Prepare consolidated financial statements on December 31, Year 6.

(b) Now assume that Brady uses the cost method to account for its investment in Partridge. Which items on Brady's separate-entity financial statements would have amounts different from those shown. Compute the cost method balances of these items.

(c) Calculate the current ratio, debt-to-equity ratio, and return on total shareholders equity for Bradys Year 6 financial statements assuming that the

(i) Equity method was used to report its investment in Partridge;

	Equity
Current ratio
Debt-to-equity ratio
Return on equity		%

(ii) Cost method was used to report its investment in Partridge;

	Cost
Current ratio
Debt-to-equity ratio
Return on equity		%

(iii) Consolidated statements were used to report the business combination with Partridge.

	Consolidation
Current ratio
Debt-to-equity ratio
Return on equity		%

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