Paper Corp. purchased 70% of the outstanding shares of Sand Ltd. on January 1, Year 2, at a cost of $98,280. 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 $32,000, and fair values were equal to carrying amounts for all its net assets, except inventory (fair value was $5,800 less than carrying amount) and equipment (fair value was $18,300 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 Cash $ Sand $ 25,000 Accounts receivable 47,000 34,800 Note receivable 33,600 Inventory 90,000 51,500 Equipment (net) 319,000 83,500 Land 200,000 45,000 Investment in Sand 144,893 $800,893 $273,400 Bank indebtedness Accounts payable $197,635 $ 80,000 65,900 Notes payable Common shares Retained earnings 33,600 150,000 50,000 339,658 157,500 $800,893 $273,400 Sales Management fee revenue Equity method income from Sand Interest income Gain on sale of land INCOME STATEMENTS For the year ended December 31, Year 5 Paper Sand $ 858,000 $ 419,700 28,800 2,461 3,360 9,600 889,261 432,660 Cost of sales 514,800 279,800 Research and development expenses. 47,500 18,000 Interest expense 22,000 Miscellaneous expenses 121,000 36,400 Income taxes 73,320 39,384 778,620 373,584 Net income $ 110,641 $ 59,076 Additional Information During Year 5. Sand made a cash payment of $2,400 per month to Paper for management fees, which is included in Sand's 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 $33,600. This land had been recorded on Sand's books at a carrying amount of $24,000. Paper paid for the land by signing a $33,600 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 $5,000. 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.) Inventory Equipment Goodwill Balance January 1, Year 2 $ Changes to Balance Year 2-4 $ Year 5 $ 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.) 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 $ $ (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.) (I) Inventory (II) Land (III) Notes payable (lv) Non-controlling interest (v) Common shares (d) Assume that an independent business valuator valued the non-controlling interest at $39,125 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