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

BALANCE SHEET
		Pearl				Silver
Cash	$	450,000			$	250,000
Accounts receivable		350,000
Inventory		2,750,000				570,000
Plant and equipment		3,750,000				4,190,000
Accumulated depreciation		(900,000	)			(460,000	)
Investment in Silver Company (at cost)		3,900,000
	$	10,300,000			$	4,550,000
Liabilities	$	635,000			$	705,000
Common shares		4,350,000				2,350,000
Retained earnings		5,315,000				1,495,000
	$	10,300,000			$	4,550,000

INCOME STATEMENT
Sales	$	4,750,000		$	1,750,000
Dividend income		280,000
		5,030,000			1,750,000
Cost of sales		2,650,000			550,000
Miscellaneous expenses		395,000			85,000
Administrative expense		95,000			25,000
Income tax expense		325,000			195,000
		(3,465,000)			(855,000)
Net income	$	1,565,000		$	895,000

RETAINED EARNINGS STATEMENT
Balance, January 1	$	4,400,000		$	950,000
Net income		1,565,000			895,000
		5,965,000			1,845,000
Dividends		(650,000)			(350,000)
Balance, December 31	$	5,315,000		$	1,495,000

Additional Information

Pearl purchased 80% of the outstanding voting shares of Silver for $3,900,000 on July 1, Year 2, at which time Silvers retained earnings were $475,000, and accumulated depreciation was $75,000. The acquisition differential on this date was allocated as follows:

• 30% to undervalued inventory
• 40% to equipmentremaining useful life 8 years
• Balance to goodwill

During Year 3, a goodwill impairment loss of $85,000 was recognized, and an impairment test conducted as at December 31, Year 6, indicated that a further loss of $35,000 had occurred.

Amortization expense is grouped with cost of goods sold and impairment losses are grouped with administrative expenses.

Silver owes Pearl $90,000 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.)