Question

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.
Required:
(a) Calculate consolidated retained earnings at December 31, Year 6.
(b) Prepare consolidated financial statements for Year 6.


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  • CreatedJune 08, 2015
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