The following financial statements were prepared on December 31, Year 6. Cash Accounts receivable Inventory Plant and equipment Accumulated depreciation: BALANCE SHEET $ Pearl 510,000 410,000 3,050,000 4,050,000 Investment in Silver Company (at cost) Liabilities Common shares Retained earnings (960,000) 4,500,000 $11,560,000 $ 533,000 4,950,000 6,077,000 $11,560,000 Silver $ 310,000 630,000 4,790,000 (520,000) $5,210,000 $ 867,000 2,650,000 1,693,000 $5,210,000 INCOME STATEMENT Sales $ 5,050,000 $2,050,000 Dividend income 328,000 5,378,000 2,050,000 Cost of sales Miscellaneous expenses Administrative expense Income tax expense Net income $ 1,787,000 2,710,000 610,000 425,000 91,000 101,000 31,000 355,000 225,000 (3,591,000) (957,000) $1,093,000 RETAINED EARNINGS STATEMENT Balance, January 11 $5,000,000 $1,010,000 Net Incone 1,787,000 1,093,000 6,787,000 2,103,000 Dividends (710,000) (410,000) Balance, December 31 $6,077,000 $1,693,000 Additional Information Pearl purchased 80% of the outstanding voting shares of Silver for $4,500,000 on July 1, Year 2, at which time Silver's retained earnings were $505,000, and accumulated depreciation was $81,000. The acquisition differential on this date was allocated as follows: 20% to undervalued inventory 30% to equipment-remaining useful life 8 years Balance to goodwill During Year 3, a goodwill impairment loss of $91,000 was recognized, and an impairment test conducted as at December 31, Year 6, indicated that a further loss of $41,000 had occurred. Amortization expense is grouped with cost of goods sold and impairment losses are grouped with administrative expenses. Silver owes Pearl $96,000 on December 31, Year 6. Required: (a) Prepare consolidated financial statements on December 31, Year 6. (Input all amounts as positive values except accumulated depreciation which should be indicated by minus sign. Omit $ sign in your response.) Required: (a) Prepare consolidated financial statements on December 31, Year 6. (Input all amounts as positive values except accumulated depreciation which should be indicated by minus sign. Omit $ sign in your response.) Sales Pearl Company Consolidated Income Statement For the Year Ended December 31, Year 6 Cost of sales Income tax Administrative expense Raw materials used Miscellaneous expense Net income Attributable to Pearl's shareholders Non-controlling interest 2 Consolidated Retained Earnings Statement For the Year Ended December 31, Year 6 Balance Jan. 1 Net income Less: Dividends Balance Dec 31 $ Assets Pearl Company Consolidated Balance Sheet Accounts receivable December 31, Year 6 Accumulated depreciation Cash Common shares Goodwill Inventory Plant and equipment Liabilities and Equity Accumulated depreciation Liabilities Non-controlling interests Common shares Retained eamings $ 0 $ 0