The following financial statements were prepared on December 31, Year 6 Additional Information Pearl purchased 80 of the outstanding voting shares of Silver for $3,300,000 on July 1, Year 2, at which time Silvers retained earnings were $445,000 and accumulated depreciation was $69,000 The acquisition differential on this date was allocated as follows 20 to undervalued inventory 40 to equipment with a remaining useful life of 8 years the balance to goodwill Pearl accounts for its investment in Silver using the cost method and values the non controlling interest in its subsidiary based on its fair value on the acquisition date, proportionate to the price paid for its controlling interest During Year 3, a goodwill impairment loss of $79,000 was recognized, and an impairment test conducted as at December 31, Year 6, indicated that a further loss of $29,000 had occurred Amortization expense is to be grouped with cost of goods sold Silver owes Pearl $84,000 on December 31, Year 6 Required Prepare consolidated financial statements on December 31, Year 6 Calculate goodwill impairment loss and non controlling interest on the consolidated income statement for the year ended December 31, Year 6, under the parent company extension theory Calculate goodwill and non controlling interest on the consolidated balance sheet as at December 31, Year 6, under the parent company extension theory Silver 190,000 $ BALANCE SHEETS Pearl Cash $ 390,000 Accounts receivable 290,000 Inventory 2,450,000 Plant and equipment 3,450,000 Accumulated depreciation (840,000) Investment in Silver Company, at cost 3,300,000 $ 9,040,000 Liabilities $ 737,000 Common shares 3,750,000 Retained earnings 4,553,000 $ 9,040,000 510,000 3,590,000 (400,000) $ $ 3,890,000 543,000 2,050,000 1,297,000 3,890,000 $ $ 1,450,000 INCOME STATEMENTS Sales $ 4,450,000 Dividend income 232,000 4,682,000 Cost of sales 2,590,000 Miscellaneous expenses 365,000 Administrative expenses 89,000 Income tax expense 295,000 3,339,000 Net income $ 1,343,000 1,450,000 490,000 79,000 19,000 165,000 753,000 697,000 $ STATEMENTS OF RETAINED EARNINGS $ $ Balance, January 1 Net income Dividends declared Balance, December 31 3,800,000 1,343,000 (590,000) 4,553,000 890,000 697,000 (290,000) 1,297,000 $ $

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The following financial statements were prepared on December 31, Year 6: Additional Information: Pearl purchased 80% of the outstanding voting shares of Silver for $3,300,000

The following financial statements were prepared on December 31, Year 6:

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Additional Information:

Pearl purchased 80% of the outstanding voting shares of Silver for $3,300,000 on July 1, Year 2, at which time Silvers retained earnings were $445,000 and accumulated depreciation was $69,000. The acquisition differential on this date was allocated as follows:

20% to undervalued inventory;
40% to equipment with a remaining useful life of 8 years;
the balance to goodwill.

Pearl accounts for its investment in Silver using the cost method and values the non-controlling interest in its subsidiary based on its fair value on the acquisition date, proportionate to the price paid for its controlling interest.

During Year 3, a goodwill impairment loss of $79,000 was recognized, and an impairment test conducted as at December 31, Year 6, indicated that a further loss of $29,000 had occurred.

Amortization expense is to be grouped with cost of goods sold.

Silver owes Pearl $84,000 on December 31, Year 6.

Required:

Prepare consolidated financial statements on December 31, Year 6.
Calculate goodwill impairment loss and non-controlling interest on the consolidated income statement for the year ended December 31, Year 6, under the parent company extension theory.
Calculate goodwill and non-controlling interest on the consolidated balance sheet as at December 31, Year 6, under the parent company extension theory.

Silver 190,000 $ BALANCE SHEETS Pearl Cash $ 390,000 Accounts receivable 290,000 Inventory 2,450,000 Plant and equipment 3,450,000 Accumulated depreciation (840,000) Investment in Silver Company, at cost 3,300,000 $ 9,040,000 Liabilities $ 737,000 Common shares 3,750,000 Retained earnings 4,553,000 $ 9,040,000 510,000 3,590,000 (400,000) $ $ 3,890,000 543,000 2,050,000 1,297,000 3,890,000 $ $ 1,450,000 INCOME STATEMENTS Sales $ 4,450,000 Dividend income 232,000 4,682,000 Cost of sales 2,590,000 Miscellaneous expenses 365,000 Administrative expenses 89,000 Income tax expense 295,000 3,339,000 Net income $ 1,343,000 1,450,000 490,000 79,000 19,000 165,000 753,000 697,000 $ STATEMENTS OF RETAINED EARNINGS $ $ Balance, January 1 Net income Dividends declared Balance, December 31 3,800,000 1,343,000 (590,000) 4,553,000 890,000 697,000 (290,000) 1,297,000 $ $