Paper Corp. purchased 70% of the outstanding shares of Sand Ltd. on January 1, Year 2, at a cost of $81,830. 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 $25,000, and fair values were equal to carrying amounts for all its net assets, except inventory (fair value was $4,000 less than carrying amount) and equipment (fair value was $12,000 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 SHEETSAt December 31, Year 5PaperSandCash$-$16,000Accounts receivable39,00028,500Note receivable-35,800Inventory75,00047,000Equipment (net)250,00079,000Land173,00036,000Investment in Sand121,709-$658,709$242,300Bank indebtedness$128,400$-Accounts payable62,00057,300Notes payable35,800-Common shares150,00050,000Retained earnings282,509135,000$658,709$242,300

INCOME STATEMENTSFor the year ended December 31, Year 5PaperSandSales$822,000$316,200Management fee revenue18,000-Equity method income from Sand1,987-Interest income-3,580Gain on sale of land-20,800841,987340,580Cost of sales493,200210,800Research and development expenses43,00014,400Interest expense14,800-Miscellaneous expenses112,00025,600Income taxes71,34035,912734,340286,712Net income$107,647$53,868

Additional Information

• During Year 5, Sand made a cash payment of $1,500 per month to Paper for management fees, which is included in Sand's Miscellaneous expenses.
• During Year 5, Paper made intercompany sales of $75,000 to Sand. The December 31, Year 5, inventory of Sand contained goods purchased from Paper amounting to $22,500. These sales had a gross profit of 35%.
• On April 1, Year 5, Paper acquired land from Sand for $35,800. This land had been recorded on Sand's books at a carrying amount of $15,000. Paper paid for the land by signing a $35,800 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 $4,100.
• 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.)

BalanceChanges toBalanceJanuary 1, Year 2Year 2-4Year 5Dec. 31, Year 5Inventory$$$$EquipmentGoodwill$$$$

(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.)

(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.)

(i)Inventory

Inventory$

(ii)Land

Land$

(iii)Notes payable

Notes payable$

(iv)Non-controlling interest

Non-controlling interest$

(v)Common shares

Common shares$

(d)Assume that an independent business valuator valued the non-controlling interest at $32,700 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