Question: On January 1 Year 4 Grant Corporation bought 8 000 80

On January 1, Year 4, Grant Corporation bought 8,000 (80%) of the outstanding common shares of Lee Company for $70,000 cash. Lee's shares were trading for $7 per share on the date of acquisition. On that date, Lee had $25,000 of common shares outstanding and $30,000 retained earnings. Also on that date, the carrying amount of each of Lee's identifiable assets and liabilities was equal to its fair value except for the following:
The patent had an estimated useful life of 5 years at January 1, Year 4, and the entire inventory was sold during Year 4. Grant uses the cost method to account for its investment.
Additional Information
• The recoverable amount for goodwill was determined to be $10,000 on December 31, Year 6. The goodwill impairment loss occurred in Year 6.
• Grant's accounts receivable contains $30,000 owing from Lee.
• Amortization expense is grouped with distribution expenses and impairment losses are grouped with other expenses.
The following are the separate-entity financial statements of Grant and Lee as at December 31, Year 6.
(a) Calculate consolidated retained earnings at December 31, Year 6.
(b) Prepare consolidated financial statements for Year 6.

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