Paper Corp. purchased 70% of the outstanding shares of Sand Ltd. on January 1, Year 2, at a cost of $83,090. 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 $25,800, and fair values were equal to carrying amounts for all its net assets, except inventory (fair value was $4,200 less than carrying amount) and equipment (fair value was $12,900 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 $ $ 17,000 Accounts receivable 39,500 29,200 Note receivable 39,700 Inventory 76,500 47,500 Equipment (net) 257,000 79,500 Land 176,000 37,000 Investment in Sand 122,206 $671,286 $249,900 Bank indebtedness $138,760 Accounts payable 64,000 62,400 Notes payable 39,700 Common shares 150,000 50,000 Retained earnings 286,746 137,500 $671,286 $249,900 INCOME STATEMENTS For the year ended December 31, Year 5 Sales Paper $ Sand 826,000 $ 321,600 Management fee revenue Equity method income from Sand 19,200 1,674 Interest income 3,978 Gain on sale of land 23,700 846,874 349,278 Cost of sales 495,600 214,400 Research and development expenses 43,500 14,800 Interest expense 15,600 Miscellaneous expenses 113,000 26,800 Income taxes 71,560 37,388 739,260 293,308 Net income $ 107,614 $ 55,962 Additional Information During Year 5, Sand made a cash payment of $1,600 per month to Paper for management fees, which is included in Sand's Miscellaneous expenses. During Year 5, Paper made intercompany sales of $80,000 to Sand. The December 31, Year 5, inventory of Sand contained goods purchased from Paper amounting to $24,000. These sales had a gross profit of 35%. On April 1, Year 5, Paper acquired land from Sand for $39,700. This land had been recorded on Sand's books at a carrying amount of $16,000. Paper paid for the land by signing a $39,700 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 $4,200. 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.) Inventory Equipment Goodwill Balance January 1, Year 2 Changes to Year 2-4 Year 5 Balance Dec. 31, Year 5 $ $ $ $ $ $ (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.) Sales PAPER CORP. Consolidated Income Statement For the Year Ended December 31, Year 5 Total revenue Total expenses Attributable to: Shareholders of Paper Non-controlling interest 0 S 0 $ 0 (c) Calculate the following balances that would appear on Paper's consolidated balance sheet as at December 31, Year 5: (Leave no cells blank - be certain to enter "0" wherever required. Omit $ sign in your response.) (1) Inventory (II) Land $ (III) Notes payable (iv) Non-controlling interest $ (v) Common shares $ 150,000 (d) Assume that an independent business valuator valued the non-controlling interest at $33,150 at the date of acquisition. Calculate goodwill impairment loss and profit attributable to non-controlling interest for the year ended December 31, Year 5. (Omit $sign In your response.) Goodwill impairment loss Profit attributable to non-controlling interest