On January 2, Year 4, Poplar Ltd. purchased 80% of the outstanding shares of Spruce Ltd. for $1,960,000. At that date, Spruce had common shares of $500,000 and retained earnings of $1,210,000 and accumulated depreciation of $560,000. 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 $740,000, 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 $ 960,000 1,920,000 2,880,000 13,440,000 Spruce $ $14,000 316,000 1,966,000 2,860,000 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 Accounts payable Accumulated depreciation: plant and equipment Bonds payable Premium on bonds payable Common shares Retained earnings, January 1 Sales Dividend revenue Interest revenue 1,960,000 2,360,000 968,000 $25,826,800 $ 2,452,000 3,936,100 500,000 502,000 873,800 44,000 694,800 600,000 314,000 310,000 250,000 $7,905,800 $2,438,500 960,000 8,000 4,500,000 9,370,700 500,000 2,011,800 4,860,000 1,960,000 200,000 35,500 $25,826,800 $7,905,800 Additional Information The Year 7 net incomes of the two companies are as follows: Poplar Ltd. $ 962,400 Spruce Ltd. 528,500 The mineral rights owned by Spruce have increased in value since the date of acquisition and were worth $937,600 at December 31, Year 7. On January 2, Year 5, Poplar sold equipment to Spruce for $470,000. The equipment had a carrying amount of $376,000 at the time of the sale. The remaining useful life of the equipment was 5 years. The Year 7 opening inventories of Poplar contained $514,000 of merchandise purchased from Spruce during Year 6. Spruce had recorded a gross profit of $205,600 on this merchandise. During Year 7, Spruce's sales to Poplar totalled $1,014,000. These sales were made at a gross profit rate of 35%. Poplar's ending inventory contains $314,000 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: 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.) (Click to select) Poplar Ltd. Consolidated Statement of Retained Earning (Click to select) (Click to select) (Click to select) Year 7 B (iii) Balance sheet (Amounts to be deducted should be indicated with a minus sign.) (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