Kumar Inc.’s separate entity statements under the cost method and its consolidated statements for the year endedDecember 31, Year 6, are presented below.

Additional Information 

• Kumar purchased 70% of the outstanding shares of Sage on January 1, Year 4, at a cost of $112,000. 

• Neither of the companies declared or paid any dividends during Year 6.

Required 

(a) Determine Kumar’s net income, retained earnings, and shareholders’ equity for its separate entity statements under the equity method. 

(b) Calculate the current ratio, debt-to-equity ratio, and return on total equity for Year 6 for Kumar’s three sets of financial statements, i.e., cost method, equity method, and consolidated. 

(c) Explain which of the three financial statements report the best liquidity, solvency, and profitability for Year 6.  

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Land Plant and equipment, net Goodwill Investment in Sage Current assets Ordinary shares Retained earnings Noncontrolling interest Long-term debt Current liabilities STATEMENTS OF FINANCIAL POSITION December 31, Year 6 Separate Entity $182,000 303,000 112,000 65,800 $662,800 $100,000 221,749 279,051 62,000 $662,800 Consolidated $ 266,000 382,000 49,430 112,250 $ 809,680 $ 100,000 266,600 38,829 309,851 94,400 $ 809,680