The balance sheets of Forest Company and Garden Company are presented below as at December 31, Year 8.

BALANCE SHEETS

At December 31, Year 8

Forest Garden

Cash $13,600 $53,800

Receivables 25,600 91,674

Inventories 80,600 67,000

Investment in shares of Garden 243,900

Plant and equipment 740,600 465,000

Accumulated depreciation (625,300) (353,400)

Patents 9,500

Investment in bonds of Forest 58,426

$479,000 $392,000

Current liabilities $59,244 $53,600

Dividends payable 6,000 30,600

Bonds payable 6% 94,846

Common shares 200,000 150,000

Retained earnings 118,910 157,800

$479,000 $392,000

Additional Information

• Forest acquired 90% of Garden for $243,900 on July 1, Year 1, and accounts for its investment under the cost method. At that time, the shareholders' equity of Garden amounted to $180,000, the accumulated amortization was $100,000, and the assets of Garden were undervalued by the following amounts:

Inventory$17,000

Buildings$15,000remaining life, 10 years

Patents$36,000remaining life, 8 years

• During Year 8, Forest reported net income of $46,000 and declared dividends of $30,000, whereas Garden reported net income of $68,000 and declared dividends of $55,000.
• During Years 2 to 7, goodwill impairment losses totaled $2,200. An impairment test conducted in Year 8 indicated a further loss of $7,400.
• Forest sells goods to Garden on a regular basis at a gross profit of 30%. During Year 8, these sales totaled $150,600. On January 1, Year 8, the inventory of Garden contained goods purchased from Forest amounting to $18,600, while the December 31, Year 8, inventory contained goods purchased from Forest amounting to $22,600.
• On August 1, Year 6, Garden sold land to Forest at a profit of $18,600. During Year 8, Forest sold one-quarter of the land to an unrelated company.
• Forest's bonds have a par value of $100,000, pay interest annually on December 31 at a stated rate of 6%, and mature on December 31, Year 11. Forest incurs an effective interest cost of 8% on these bonds. They had a carrying amount of $93,376 on January 1, Year 8. On that date, Garden acquired $60,000 of these bonds on the open market at a cost of $57,968. Garden will earn an effective rate of return of 7% on them. Both companies use the effective-interest method to account for their bonds.

The Year 8 income statements of the two companies show the following with respect to bond interest.

Forest Garden

Interest expense $7,470

Interest revenue $4,058

• Garden owes Forest $22,600 on open account on December 31, Year 8.
• Assume a 40% corporate tax rate and allocate bond gains (losses) between the two companies.

Prepare the following statements:

(i)Consolidated balance sheet(Amounts to be deducted should be indicated by a minus sign. Do not round intermediate calculations and round your final answers to nearest dollar amount. The balance sheet total may vary due to rounding.)

(ii)Consolidated retained earnings statement(Input all values as positive numbers. Do not round intermediate calculations and round your final answers to nearest dollar amount.Omit $ sign in your response.)

(iii) Prepare the Year 8 journal entries that would be made on the books of Forest if the equity method was used to account for the investment.(If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations and round your final answers to nearest dollar amount.)

Transaction list -

To record 90% of adjusted subsidiary income

To record 90% of Garden's dividend of $55,000

To record the adjustments to parent's net income.