The financial statements of Post Corporation and its subsidiary, Sage Company, as at December 31, Year 6, are presented below.

Additional Information

• Post purchased 70% of the outstanding shares of Sage on January 1, Year 4, at a cost of $77,000. On that date, Sage had accumulated depreciation of $12,000, retained earnings of $17,000, and fair values were equal to carrying amounts for all its net assets, except inventory (overvalued by $14,000).
• In determining the purchase price, the management of Post noted that Sage, as lessee, leases a warehouse that has terms that are unfavourable relative to market terms. However, the lease agreement explicitly prohibits transfer of the lease (through either sale or sublease). An independent appraiser indicated that the fair value of this unfavourable lease agreement is $20,000. There were five years remaining on this lease on the date of acquisition.
• 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 $16,000. There were no intercompany purchases in the inventory of Sage on this date.
• During Year 6 the following intercompany transactions took place:
  • Sage made sales of $96,000 to Post. The December 31, Year 6, inventory of Post contained goods purchased from Sage amounting to $29,000.
  • Post made sales of $129,000 to Sage. The December 31, Year 6, inventory of Sage contained goods purchased from Post amounting to $20,000.
  • On July 1, Year 6, Post borrowed $52,000 from Sage and signed a note bearing interest at 12% per annum. The interest on this note was paid on December 31, Year 6.
  • During the year, Sage sold land to Post and recorded a gain of $32,000 on the transaction. This land is being held by Post on December 31, Year 6.
• Goodwill impairment losses occurred as follows: Year 4, $2,600; Year 5, $520; Year 6, $1,300.
• Neither Post nor Page paid any dividends during the year.
• Post uses the equity method to account for its investment in Sage.
• Both companies pay income tax at 40% on their taxable incomes.

Required:

Prepare the consolidated income statements for Year 6

Sage $ 21,000 62,000 (19,000) STATEMENTS OF FINANCIAL POSITION December 31, Year 6 Post Land $ 177,000 Plant and equipment 526,000 Accumulated depreciation (232,000) Investment in Sage 122,321 Inventory 34,000 Notes receivable Accounts receivable 17,400 Cash 12,400 $ 657, 121 Ordinary shares $ 100,000 Retained earnings 266,100 Notes payable 52,000 Accounts payable 239,021 $ 657, 121 29,000 52,000 9,600 12,600 $167,200 $ 50,000 88,000 29,200 $167,200 Sage $ 253,000 7,000 STATEMENTS OF PROFIT-Year 6 Post Sales $ 920,000 Management fee revenue 26,000 Interest revenue Equity method income from Sage 2,285 Gain on sale of land 948, 285 Cost of goods sold 560,000 Interest expense 20,200 Other expenses 182,000 Income tax expense 82,000 (844, 200) Profit $ 104,085 32,000 292,000 175,000 75,000 16,000 (266,000) $ 26,000 Post Corporation Consolidated Statement of Profit For the Year Ended, December 31, Year 6 Total revenue Total expenses Attributable to: Shareholders of Post Non-controlling interests Sage $ 21,000 62,000 (19,000) STATEMENTS OF FINANCIAL POSITION December 31, Year 6 Post Land $ 177,000 Plant and equipment 526,000 Accumulated depreciation (232,000) Investment in Sage 122,321 Inventory 34,000 Notes receivable Accounts receivable 17,400 Cash 12,400 $ 657, 121 Ordinary shares $ 100,000 Retained earnings 266,100 Notes payable 52,000 Accounts payable 239,021 $ 657, 121 29,000 52,000 9,600 12,600 $167,200 $ 50,000 88,000 29,200 $167,200 Sage $ 253,000 7,000 STATEMENTS OF PROFIT-Year 6 Post Sales $ 920,000 Management fee revenue 26,000 Interest revenue Equity method income from Sage 2,285 Gain on sale of land 948, 285 Cost of goods sold 560,000 Interest expense 20,200 Other expenses 182,000 Income tax expense 82,000 (844, 200) Profit $ 104,085 32,000 292,000 175,000 75,000 16,000 (266,000) $ 26,000 Post Corporation Consolidated Statement of Profit For the Year Ended, December 31, Year 6 Total revenue Total expenses Attributable to: Shareholders of Post Non-controlling interests