Problem 05-12 (LO1, 2, 3) On January 1, Year 4, Grant Corporation bought 1,000 (80%) of the outstanding common shares of Devy Company for $8,750 cash. Devy's shares were trading for $7 per share on the date of acquisition. On that date, Devy had $3,125 of common shares outstanding and $3,750 retained earnings. Also on that date, the carrying amount of each of Devy's identifiable assets and liabilities was equal to its fair value except for the following: Inventory Patent Carrying Amount $6,250 1,250 Fair Value $6,875 2,500 The patent had an estimated useful life of five years at January 1, Year 4, and the entire inventory was sold during Year 4. Grant uses the cost method to account for its investment. The following are the separate-entity financial statements of Grant and Devy as at December 31, Year 7: Assets Cash BALANCE SHEETS At December 31, Year 7 Accounts receivable Inventory Investment in Devy Equipment (net) Patent (net) Liabilities and Shareholders' Equity Accounts payable Other accrued liabilities Income taxes payable Common shares Retained earnings INCOME STATEMENT Year ended December 31, Year 7 Sales Cost of goods sold Gross margin Distribution expense Other expenses Income tax expense Net incore Additional Information Grant Devy $ 23,125 38,750 625 $ 2,250 10,250 12,500 8,750 28,750 25,625 258 $100,000 $ 50,875 $ 23,750 $ 24,375 7,500 6,258 10,000 9,000 21,250 3,125 37,500 8,125 $100,000 $ 50,875 Grant Devy $ 112,500 (42,500) $ 45,000 (30,000) 70,000 15,000 (3,750) (3,125) (22,500) (7,000) (15,000) (2,000) $ 28,750 $ 2,875 The recoverable amount for goodwill was determined to be $1,250 on December 31, Year 7. The goodwill impairment loss occurred in Year 7. Grant's accounts receivable contains $3,750 owing from Devy. Amortization expense is grouped with distribution expenses and impairment losses are grouped with other expenses. Required: (a) Calculate consolidated retained earnings at December 31, Year 7. (Input all values as positive numbers. Omit $ and % sign in your response.) Calculation of consolidated retained earnings - Dec 31, Year 7 Retained earnings Grant Retained earnings - Devy Retained earnings on acquisition Increase Grant's share $ $ Less: Changes to acquisition differential $