Paper Corp. purchased 70% of the outstanding shares of Sand Ltd. on January 1, Year 2, at a cost of $77,910. 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 $23,000, and fair values were equal to carrying amounts for all its net assets, except inventory (fair value was $3,600 less than carrying amount) and equipment (fair value was $10,800 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 $ $ 14,000 Accounts receivable 38,000 27,100 Note receivable 30,700 Inventory 72,000 46,000 Equipment (net) 240,000 78,000 Land 167,000 34,000 Investment in Sand 119,721 $ 636,721 $ 229,800 Bank indebtedness $ 124,910 $ Accounts payable 58,000 49,800 Notes payable 30,700 Common shares 150,000 50,000 Retained earnings 273,111 130,000 $ 636,721 $ 229,800 INCOME STATEMENTS For the year ended December 31, Year 5 Paper Sand Sales $ 814,000 $ 310,800 Management fee revenue 15,600 Equity method income from Sand 4,950 Interest income 3,070 Gain on sale of land 17,700 834,550 331,570 Cost of sales 488,400 207,200 Research and development expenses 42,000 13,600 Interest expense 13,200 Miscellaneous expenses 110,000 23,200 Income taxes 70,900 35,028 724,500 279,028 Net income $ 110,050 $ 52,542 Additional Information During Year 5, Sand made a cash payment of $1,300 per month to Paper for management fees, which is included in Sands Miscellaneous expenses. During Year 5, Paper made intercompany sales of $65,000 to Sand. The December 31, Year 5, inventory of Sand contained goods purchased from Paper amounting to $19,500. These sales had a gross profit of 35%. On April 1, Year 5, Paper acquired land from Sand for $30,700. This land had been recorded on Sands books at a carrying amount of $13,000. Paper paid for the land by signing a $30,700 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 $3,900. 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 Papers 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 Papers 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 $31,800 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 $