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	$	40,000
Land		90,000
Plant and equipment		40,000			Estimated life 5 years
Patent		40,000			Estimated life 8 years
Goodwill		70,000
	$	280,000

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

	Road			Runner
Sales	$	4,000,000			$	2,040,000
Intercompany investment income		199,500
Rental revenue						80,000
Total income		4,199,500				2,120,000
Materials used in manufacturing		2,000,000				740,000
Changes in work-in-progress and finished goods inventory		40,000				(30,000	)
Employee benefits		490,000				420,000
Interest expense		190,000				80,000
Depreciation		345,000				265,000
Patent amortization						45,000
Rental expense		40,000
Income tax		240,000				311,000
Total expenses		3,345,000				1,831,000
Profit	$	854,500			$	289,000

Additional Information

• Runner regularly sells raw materials to Road. Intercompany sales in Year 9 totalled $360,000.
• Intercompany profits in the inventories of Road were as follows:

January 1, Year 9	$130,000
December 31, Year 9	110,000

• Roads 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 $2,525,100 and $1,090,000, 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.