On January 2, Year 4, Poplar Ltd. purchased 80% of the outstanding shares of Spruce Ltd. for $1,950,000. At that date, Spruce had common shares of $500,000 and retained earnings of $1,200,000 and accumulated depreciation of $550,000. 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 $737,500, 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: Cash Accounts receivable Inventory Plant and equipment Investment in Spruce (cost) Investment in bonds Cost of goods sold Other expenses Interest expense Income tax expense Dividends $ Poplar 950,000 1,900,000 2,850,000 13,300,000 1,950,000 Spruce $ 515,000 306,000 1,956,000 2,850,000 503,000 2,350,000 875,500 967,000 315,000 43,000 679,000 300,000 600,000 250,000 $25,589,000 $7,870,500 $2,428,500 Accounts payable Accumulated depreciation: plant and equipment Bonds payable Premium on bonds payable Common shares Retained earnings, January 1 Sales Dividend revenue Interest revenue $ 2,442,000 3,920,000 500,000 8,000 4,500,000 9,169,000 4,850,000 200,000 Additional Information The Year 7 net incomes of the two companies are as follows: Poplar Ltd. $ 978,000 Spruce Ltd. 529,000 $25,589,000 950,000 500,000 2,005,500 1,950,000 36,500 $7,870,500 .. The mineral rights owned by Spruce have increased in value since the date of acquisition and were worth $938,500 at December 31, Year 7. On January 2, Year 5, Poplar sold equipment to Spruce for $460,000. The equipment had a carrying amount of $368,000 at the time of the sale. The remaining useful life of the equipment was 5 years. The Year 7 opening inventories of Poplar contained $515,000 of merchandise purchased from Spruce during Year 6. Spruce had recorded a gross profit of $206,000 on this merchandise. During Year 7, Spruce's sales to Poplar totalled $1,015,000. These sales were made at a gross profit rate of 35%. Poplar's ending inventory contains $315,000 of merchandise purchased from Spruce. 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 (Input all values as positive numbers.) Poplar Ltd. Consolidated Income Statement Year 7 Total revenues Total expenses Attributable to: Shareholders of Poplar NCI (ii) Retained earnings statement (Input all values as positive numbers. Omit $ sign in your response.) Poplar Ltd. Consolidated Statement of Retained Earnings (Click to select) (Click to select) (Click to select) Year 7 (Click to select) (iii) Balance sheet (Amounts to be deducted should be indicated with a minus sign.) Poplar Ltd. Consolidated Balance Sheet Dec. 31, Year 7 Total assets Total liabilities and shareholders' equity (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.) Balance, Dec. 31, Year 7 $ (c) Not available in Connect