Paper Corp. purchased $70\%$ of the outstanding shares of Sand Ltd$.$ on January $1,$ Year $2,$ at a cost of $$87,535.$ Paper has always used the equity method to account for its investments. On January $1,$ Year $2,$ Sand had common shares of $$50,000$ and retained earnings of $$29,750,$ and fair values were equal to carrying amounts for all its net assets, except inventory $($fair value was $$5,200$ less than carrying amount$)$ and equipment $($fair value was $$17,400$ greater than carrying amount$).$ The equipment, which is used for research, had an estimated remaining life of six years on January $1,$ Year $2.$

The following are the financial statements of Paper Corp. and its subsidiary Sand Ltd$.$ as at December $31,$ Year $5$:

BALANCE SHEETS

At December $31,$ Year $5$

Paper Sand

Cash $ $$ $ $22,000$

Accounts receivable $44,00032,700$

Note receivable $31,800$

Inventory $84,60050,000$

Equipment $($net$)292,00082,000$

Land $191,00042,000$

Investment in Sand $135,884$

$ $747,484$ $ $260,500$

Bank indebtedness $ $172,145$ $ $$

Accounts payable $74,00060,500$

Notes payable $31,800$

Common shares $150,00050,000$

Retained earnings $319,539150,000$

$ $747,484$ $ $260,500$

INCOME STATEMENTS

For the year ended December $31,$ Year $5$

Paper Sand

Sales $ $846,000$ $ $365,700$

Management fee revenue $25,200$

Equity method income from Sand $2,862$

Interest income $3,180$

Gain on sale of land $10,800$

$874,062379,680$

Cost of sales $507,600243,800$

Research and development expenses $46,00016,800$

Interest expense $19,600$

Miscellaneous expenses $118,00032,800$

Income taxes $72,66034,512$

$763,860327,912$

Net income $ $110,202$ $ $51,768$

Additional Information

During Year $5,$ Sand made a cash payment of $$2,100$ per month to Paper for management fees, which is included in Sand$$s Miscellaneous expenses.

During Year $5,$ Paper made intercompany sales of $$110,000$ to Sand. The December $31,$ Year $5,$ inventory of Sand contained goods purchased from Paper amounting to $$33,000.$ These sales had a gross profit of $35\%.$

On April $1,$ Year $5,$ Paper acquired land from Sand for $$31,800.$ This land had been recorded on Sand$$s books at a carrying amount of $$21,000.$ Paper paid for the land by signing a $$31,800$ note payable to Sand, bearing yearly interest at $10\%.$ Interest for Year $5$ was paid by Paper in cash on December $31,$ Year $5.$ This land was still being held by Paper on December $31,$ Year $5.$

The value of consolidated goodwill remained unchanged from January $1,$ Year $2,$ to July Year $5.$ On July $1,$ Year $5,$ a valuation was performed, indicating that the recoverable amount of consolidated goodwill was $$4,700.$

During the year ended December $31,$ Year $5,$ Paper paid dividends of $$80,000$ and Sand paid dividends of $$20,000.$

Sand and Paper pay taxes at a $40\%$ rate. Assume that none of the gains or losses were capital gains or losses.

Required:

$($a$)$ Prepare, in good form, a calculation of goodwill and any undepleted acquisition differential as of December $31,$ Year $5.($Negative amounts should be indicated by a minus sign. Leave no cells blank $-$ be certain to enter $"0"$ wherever required. Omit $ sign in your response.$)$

Balance Changes to Balance

January $1,$ Year $2$ Year $2-4$ Year $5$ Dec. $31,$ Year $5$

Inventory $ $ $ $

Equipment

Goodwill

$ $ $ $

$($b$)$ Prepare Paper$$s consolidated income statement for the year ended December $31,$ Year $5,$ with expenses classified by function. $($Round your answer to nearest whole dollar.$)$