Puny acquired all of Small's common stock on January 1,2013. Over the next few years, Puny applied the equity method to the recording of this investment. At the date of the original acquisition, $90,000 of the fair-value price was attributed to undevalued land while $50,000 was assigned to equipment having a 10-year remaining life. The $60,000 unallocated portion of the acquisition-date excess fair value over book value was viewed as goodwill.

Following are individual financial statements for the year ending December 31,2017. On that date,Small owes Puny $10,000. Small declared and paid dividends in the same period. Credits are indicated by parentheses

Puny Small

Revenues ($1,175,000) ($360,000)

Cost of Goods sold $550,000 $90,000

Depreciation expense $172,000 $130,000

Equity in income of Small ($135,000) -

Net income ($588,000) ($140,000)

Retained earnings, 1/1/17 ($1,417,000) ($620,000)

Net income (above) ($588,000) ($140,000)

Dividends declared $310,000 $110,000

Retained earnings 12/31/17 ($1,695,000) ($650,000)

Current assets $398,000 $318,000

Investment in Small $995,000 -

Land $440,000 $165,000

Buildings (net) $304,000 $419,000

Equipment (net) $648,000 $286,000

Goodwill - -

Total assets $2,785,000 $1,188,000

Liabilities ($840,000) ($368,000)

Common stock ($250,000) ($170,000)

Retained earnings (above) ($1,695,000) ($650,000)

Total liabilities and equity ($2,785,000) ($1,188,000)

Required:

a) How was the $135,000 Equity in Income of Small balance computed?

b) Without preparing a worksheet of consolidation entries, determine and explain the totals to be reported by this business combination for the year ending Dec 31,2017.

c) Verify the figures determines in part B by producing a consolidation worksheet for Puny and Small for the year ending Dec 31,2017.

d) If Puny determined that the entire amount of goodwill from its investment in Small was impaired in 2017, how would the parent's accounts reflect the impairment loss? How would the worksheet process change? What impact does an impairment loss have on consolidated financial statements?