On January $2,$ Year $4,$ Poplar Ltd$.$ purchased $80\%$ of the outstanding shares of Spruce Ltd$.$ for $$2,030,000.$ At that date, Spruce had common shares of $$500,000$ and retained earnings of $$1,280,000$ and accumulated depreciation of $$630,000.$ Poplar acquired the Spruce shares to obtain control of mineral rights owned by Spruce. At the date of acquisition, these mineral rights were valued at $$757,500,$ were not recognized on Spruce$$s separate$-$entity balance sheet, and had an useful life of $10$ years. Except for the mineral rights, the carrying amount of the recorded assets and liabilities of Spruce were equal to their fair values. On December $31,$ Year $7,$ the trial balances of the two companies were as follows:

Poplar Spruce

Cash $ $1,030,000$ $ $503,000$

Accounts receivable $2,060,000388,000$

Inventory $3,090,0002,036,000$

Plant and equipment $14,420,0002,930,000$

Investment in Spruce $($cost$)2,030,000$

Investment in bonds $242,000$

Cost of goods sold $2,430,000855,100$

Other expenses $969,000303,000$

Interest expense $37,000$

Income tax expense $647,400380,000$

Dividends $600,000250,000$

$ $27,313,400$ $ $7,887,100$

Accounts payable $ $2,518,000$ $ $2,508,500$

Accumulated depreciation: plant and equipment $4,048,3001,030,000$

Bonds payable $500,000$

Premium on bonds payable $12,000$

Common shares $4,500,000500,000$

Retained earnings, January $110,605,1001,794,100$

Sales $4,930,0002,032,500$

Dividend revenue $200,000$

Interest revenue $22,000$

$ $27,313,400$ $ $7,887,100$

Additional Information

The Year $7$ net incomes of the two companies are as follows:

Poplar Ltd$.$ $ $1,046,600$

Spruce Ltd$.516,400$

The mineral rights owned by Spruce have increased in value since the date of acquisition and were worth $$927,700$ at December $31,$ Year $7.$

On January $2,$ Year $5,$ Poplar sold equipment to Spruce for $$530,000.$ The equipment had a carrying amount of $$424,000$ at the time of the sale. The remaining useful life of the equipment was $5$ years.

The Year $7$ opening inventories of Poplar contained $$503,000$ of merchandise purchased from Spruce during Year $6.$ Spruce had recorded a gross profit of $$201,200$ on this merchandise.

During Year $7,$ Spruce$$s sales to Poplar totalled $$1,003,000.$ These sales were made at a gross profit rate of $35\%.$

Poplar$$s ending inventory contains $$303,000$ of merchandise purchased from Spruce.

On January $2,$ Year $5,$ Poplar issued $8\%,7$ year bonds with a face value of $$500,000$ for $$521,000.$ Interest is paid annually on December $31.$ On January $2,$ Year $6,$ Spruce purchased one$-$half of this issue on the open market at a cost of $$238,000.$

Other expenses include depreciation expense.

Tax allocation will be at a rate of $40\%.$

Required:

$($a$)$ Prepare the following consolidated financial statements for Year $7$:

$($i$)$ Income statement $($Leave no cells blank $-$ be certain to enter $"0"$ wherever required. Input all values as positive numbers.$)$

$($ii$)$ Retained earnings statement $($Input all values as positive numbers. Omit $ sign in your response.$)$

$($iii$)$ Balance sheet $($Leave no cells blank $-$ be certain to enter $"0"$ wherever required. Amounts to be deducted should be indicated with a minus sign.$)$

$($b$)$ Calculate the December $31,$ Year $7,$ balance in the account Investment in Spruce if Poplar had used the equity method to account for its investment. $($Omit $ sign in your response