P Corporation owns 80% of the outstanding voting shares of S Corporation, having acquired its interest January 1, 20X3, for $100,000. At the time of the acquisition, S Corporation had a shareholders' equity totalling $50,000, made up of retained earnings of $30,000 and common shares of $20,000. The following accounts had fair values higher (or lower) than its carrying values:

Inventory fair value is $10,000 higher than carrying value.

Equipment fair value is $40,000 higher than carrying value.

Land fair value is $20,000 lower than carrying value.

The equipment had a remaining useful life at the time of acquisition of five years.

The company uses the entity approach to determine the amount of goodwill. P accounts for its investment in S using the cost method.

Statement of Comprehensive Income

Year Ended December 31, 20X6

(in thousands of $'s)

P S

Sales $600 $250

Gain on sale of land and buildings 0 70

Dividend income 40 0

Total revenue 640 320

Cost of goods sold 380 134

Operating expenses 164 80

Total expenses 544 214

Net Income $96 $106

Statement of Changes in EquityPartialRetained Earnings Section

Year Ended December 31, 20X6

(In thousands of $'s)

P S

Opening retained earnings $400 $100

Net income 96 106

Dividends (100) (40)

Ending retained earnings $396 $166

The balance of the land and buildings at December 31, 20X6, for P totalled $895,000 and for S totalled $450,000.

Additional Information:

1. S had reported a gain of $50,000, relating to land (40%) and building (60%) sold to P on January 3, 20X6. These separate properties had not been owned on January 1, 20X3. Remaining useful life was expected to be 10 years at that time.

2. S sold other land to a non-related company at a gain of $20,000 on June 30, 20X6.

3. Intercompany sales and inventory data for 20X5 and 20X6:

20X5 20X6

Sales by P to S $40,000 $60,000

Inventory not yet sold at end of year $20,000 $35,000

Sales by S to P $50,000 $50,000

Inventory not yet sold at end of year $10,000 $40,000

Profit margins on sales by P to S are 40%.

Profit margins on sales by S to P are at 30%.

Required:

1. Prepare a complete consolidated statement of comprehensive income for the year ending December 31, 20X6.

2. Calculate the following consolidated balance as at December 31, 20X6:

a. Retained earnings

b. Land and buildings