Paper Corp. purchased 70% of the outstanding shares of Sand Ltd. on January 1, Year 2, at a cost of $92,855. 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 $31,250, and fair values were equal to carrying amounts for all its net assets, except inventory (fair value was $5,600 less than carrying amount) and equipment (fair value was $18,000 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 SHEETS

At December 31, Year 5

Paper

Sand

Cash

$

$

24,000

Accounts receivable

46,000

34,100

Note receivable

33,900

Inventory

88,200

51,000

Equipment (net)

310,000

83,000

Land

197,000

44,000

Investment in Sand

138,992

$

780,192

$

270,000

Bank indebtedness

$

188,205

$

Accounts payable

78,000

65,000

Notes payable

33,900

Common shares

150,000

50,000

Retained earnings

330,087

155,000

$

780,192

$

270,000

INCOME STATEMENTS
For the year ended December 31, Year 5
	Paper			Sand
Sales	$	854,000		$	401,700
Management fee revenue		27,600
Equity method income from Sand		1,956
Interest income					3,390
Gain on sale of land					10,900
		883,556			415,990
Cost of sales		512,400			267,800
Research and development expenses		47,000			17,600
Interest expense		21,200
Miscellaneous expenses		120,000			35,200
Income taxes		73,100			38,156
		773,700			358,756
Net income	$	109,856		$	57,234
Additional Information During Year 5, Sand made a cash payment of $2,300 per month to Paper for management fees, which is included in Sands Miscellaneous expenses. During Year 5, Paper made intercompany sales of $120,000 to Sand. The December 31, Year 5, inventory of Sand contained goods purchased from Paper amounting to $36,000. These sales had a gross profit of 35%. On April 1, Year 5, Paper acquired land from Sand for $33,900. This land had been recorded on Sands books at a carrying amount of $23,000. Paper paid for the land by signing a $33,900 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 $4,900. 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.

(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 $38,200 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		$