Post Corporation purchased 70% of the outstanding shares of Sage Company on January 1, Year 4, at a cost of $84,000. On that date, Sage had ordinary shares of $50,000 and retained earnings of $18,000, and fair values were equal to carrying amounts for all its net assets, except inventory (overvalued by $15,000) and warehouse (included with PPE), which was overvalued by $21,000. At the date of acquisition, the warehouse had an estimated remaining life of five years.

Posts quality merchandise, leadership in customer care, and deep product knowledge will be a strong complement to Sagess well-established market base, best practices in the retail sales, and well-established talent pool of committed retail employees.

The companies sell merchandise to each other at a gross profit rate of 25%.

The December 31, Year 5 inventory of Post contained purchases made from Sage amounting to $17,000. There were no intercompany purchases in the inventory of Sage on this date.

During Year 6, the following intercompany transactions took place:

Sage made a payment of $27,000 to Post for management fees, which was recorded under the category Other Expenses.

Sage made sales of $102,000 to Post. The December 31, Year 6 inventory of Post contained goods purchased from Sage amounting to $30,000.

Post made sales of $130,000 to Sage. The December 31, Year 6 inventory of Sage contained goods purchased from Post amounting to $21,000.

On July 1, Year 6, Post borrowed $54,000 from Sage and signed a note bearing interest at 12% per annum or $6,480 per year. The principal amount of the loan is to be paid on December 31, Year 10. Post paid the proper amount of interest to Sage on December 31, Year 6.

During Year 6, Sage sold land to Post and recorded a $34,000 gain on the transaction. All of this land is currently being held by Post on December 31, Year 6.

Goodwill impairment losses occurred as follows: Year 4, $2,700; Year 5, $540; Year 6, $1,350.

In Year 6, Average Total Assets were $600,363 and $175,500 for Post and Sage respectively. The Average Total Assets in Year 6 for the Consolidated Entity was $723,148.

In Year 6, Average Total Shareholders Equity were $314,800 and $123,570 for Post and Sage respectively. The Average Total Shareholders Equity in Year 6 for the Consolidated Entity was $412,655.

Neither Post nor Sage paid any dividends in Years 4, 5 or 6.

Post uses the Cost Method for internal reporting to account for its Investment in Sage.

Both companies have December 31st year-ends and pay income tax at 40% on their taxable incomes. Depreciation expenses is classified as other expenses by both Post and Sage.

Consolidated retained earnings at January 1, Year 6 is $206,527.

Prepare the consolidated financial statements for Year 6