On January $2,$ Year $5,$ Road Ltd$.$ acquired $70\%$ of the outstanding voting shares of Runner Ltd$.$ The acquisition differential of $$280,000$ on that date was allocated in the following manner:

Inventory $ $100,000$

Land $50,000$

Plant and equipment $60,000$ Estimated life $5$ years

Patent $40,000$ Estimated life $8$ years

Goodwill $30,000$

$ $280,000$

The Year $9$ income statements for the two companies were as follows:

Road Runner

Sales $ $4,000,000$ $ $2,100,000$

Intercompany investment income $210,700$

Rental revenue $70,000$

Total income $4,210,7002,170,000$

Materials used in manufacturing $2,000,000800,000$

Changes in work$-$in$-$progress and finished goods inventory $45,000(20,000)$

Employee benefits $550,000480,000$

Interest expense $250,000140,000$

Depreciation $405,000245,000$

Patent amortization $25,000$

Rental expense $35,000$

Income tax $300,000200,000$

Total expenses $3,585,0001,870,000$

Profit $ $625,700$ $ $300,000$

Additional Information

Runner regularly sells raw materials to Road. Intercompany sales in Year $9$ totalled $$420,000.$

Intercompany profits in the inventories of Road were as follows:

January $1,$ Year $9$ $$75,000$

December $31,$ Year $940,000$

Road$$s entire rental expense relates to equipment rented from Runner.

A goodwill impairment loss of $$3,000$ occurred in Year $9.$

Retained earnings at December $31,$ Year $9,$ for Road and Runner were $$2,525,700$ and $$1,150,000,$ respectively.

Road uses the equity method to account for its investment, and uses income tax allocation at the rate of $40\%$ when it prepares consolidated statements.

Required:

$($a$)$ Prepare a consolidated income statement for Year $9$ with expenses classified by nature. $($Input all amounts as positive number except for Change in work$-$in$-$progress and finished goods inventory that must be entered with appropriate sign. Omit $ sign in your response.$)$

Road Ltd$.$

Consolidated Income Statement

for the Year Ended December $31,$ Year $9$

Sales $

Rental revenue

Total income

Materials used in manufacturing

Change in work$-$in$-$progress and finished goods inventory

Employee benefits

Interest expense

Depreciation

Patent amortization

Goodwill impairment loss

Income tax

Total expenses

Profit $

Attributable to:

Shareholders of Road

Non$-$controlling interests

$

$($b$)$ Calculate consolidated retained earnings at December $31,$ Year $9.($Omit $ sign in your response.$)$

Consolidated retained earnings $

$($c$)$ This part of the question is not part of your Connect assignment.