Paper Corp. purchased 70% of the outstanding shares of Sand Ltd. on January 1, Year 2, at a cost of $76,160. 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 $21,000, and fair values were equal to carrying amounts for all its net assets, except inventory (fair value was $3,200 less than carrying amount) and equipment (fair value was $9,600 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: Sand $ 12,000 25,700 36,300 45,000 77,000 32,000 BALANCE SHEETS At December 31, Year 5 Paper Cash $ Accounts receivable 37,000 Note receivable Inventory 69,000 Equipment (net) 230,000 Land 161,000 Investment in Sand 113,239 $610, 239 Bank indebtedness $110, 820 Accounts payable 54,000 Notes payable 36,300 Common shares 150,000 Retained earnings 259,119 $610,239 $228,000 $ 53,000 50,000 125,000 $228,000 Sand $ 305,400 INCOME STATEMENTS For the year ended December 31, Year 5 Paper Sales $ 806,000 Management fee revenue 13, 200 Equity method income from Sand 6,194 Interest income Gain on sale of land 825,394 Cost of sales 483,600 Research and development expenses 41,000 3,630 25,300 334, 330 203,600 12,800 Interest expense Miscellaneous expenses Income taxes 11,600 108,000 70,460 714,660 $ 110,734 20,800 38,852 276,052 58,278 Net income $ Additional Information . During Year 5, Sand made a cash payment of $1,100 per month to Paper for management fees, which is included in Sand's Miscellaneous expenses. . During Year 5, Paper made intercompany sales of $55,000 to Sand. The December 31, Year 5, inventory of Sand contained goods purchased from Paper amounting to $16,500. These sales had a gross profit of 35%. . On April 1, Year 5, Paper acquired land from Sand for $36,300. This land had been recorded on Sand's books at a carrying amount of $11,000. Paper paid for the land by signing a $36,300 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 $3,700. . 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 "O" wherever required. Omit $ sign in your response.) Balance January 1, Year 2 $ Changes to Year 2-4 Year 5 $ $ Balance 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.) PAPER CORP. Consolidated Income Statement For the Year Ended December 31, Year 5 Total revenue 0 Total expenses 0 $ 0 Attributable to: Shareholders of Paper Non-controlling interest $ 0 (c) Calculate the following balances that would appear on Paper's consolidated balance sheet as at December 31, Year 5: (Leave no (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 "O" wherever required. Omit $ sign in your response.) (1) 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 $30,900 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 $ Paper Corp. purchased 70% of the outstanding shares of Sand Ltd. on January 1, Year 2, at a cost of $76,160. 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 $21,000, and fair values were equal to carrying amounts for all its net assets, except inventory (fair value was $3,200 less than carrying amount) and equipment (fair value was $9,600 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: Sand $ 12,000 25,700 36,300 45,000 77,000 32,000 BALANCE SHEETS At December 31, Year 5 Paper Cash $ Accounts receivable 37,000 Note receivable Inventory 69,000 Equipment (net) 230,000 Land 161,000 Investment in Sand 113,239 $610, 239 Bank indebtedness $110, 820 Accounts payable 54,000 Notes payable 36,300 Common shares 150,000 Retained earnings 259,119 $610,239 $228,000 $ 53,000 50,000 125,000 $228,000 Sand $ 305,400 INCOME STATEMENTS For the year ended December 31, Year 5 Paper Sales $ 806,000 Management fee revenue 13, 200 Equity method income from Sand 6,194 Interest income Gain on sale of land 825,394 Cost of sales 483,600 Research and development expenses 41,000 3,630 25,300 334, 330 203,600 12,800 Interest expense Miscellaneous expenses Income taxes 11,600 108,000 70,460 714,660 $ 110,734 20,800 38,852 276,052 58,278 Net income $ Additional Information . During Year 5, Sand made a cash payment of $1,100 per month to Paper for management fees, which is included in Sand's Miscellaneous expenses. . During Year 5, Paper made intercompany sales of $55,000 to Sand. The December 31, Year 5, inventory of Sand contained goods purchased from Paper amounting to $16,500. These sales had a gross profit of 35%. . On April 1, Year 5, Paper acquired land from Sand for $36,300. This land had been recorded on Sand's books at a carrying amount of $11,000. Paper paid for the land by signing a $36,300 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 $3,700. . 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 "O" wherever required. Omit $ sign in your response.) Balance January 1, Year 2 $ Changes to Year 2-4 Year 5 $ $ Balance 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.) PAPER CORP. Consolidated Income Statement For the Year Ended December 31, Year 5 Total revenue 0 Total expenses 0 $ 0 Attributable to: Shareholders of Paper Non-controlling interest $ 0 (c) Calculate the following balances that would appear on Paper's consolidated balance sheet as at December 31, Year 5: (Leave no (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 "O" wherever required. Omit $ sign in your response.) (1) 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 $30,900 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 $