Pharma Company (Pharma) is a pharmaceutical company operating in Winnipeg. It is developing a new drug for treating multiple sclerosis (MS). On January 1, Year 3, Benefit Ltd. (Benefit) signed an agreement to guarantee the debt of Pharma and guarantee a specified rate of return to the common shareholders. In return, Benefit will obtain the residual profits of Pharma. After extensive analysis, it has been determined that Pharma is a controlled special-purpose entity and Benefit is its sponsor. The balance sheets (in millions) of Benefit and Pharma on January 1, Year 3, were as follows:

An independent appraiser determined the fair values of Pharma's noncurrent assets. The appraiser was quite confident with the appraised value for the property, plant, and equipment but had some reservations in putting a specific value on the intangible assets.

Required

Prepare a consolidated balance sheet at January 1, Year 3, assuming that the agreement between Benefit and Pharma established the following fair values for the common shares of Pharma:

(a) $45 million

(b) $40 million

(c) $55 million

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Benefit Pharma Carrying Amount $ 400 Fair Value Carrying Amount Current assets Property, plant, and equipment Intangible assets $150 $150 600 180 190 100 120 $460 70 $400 $1,100 $ 245 Current liabilities $160 $160 Long-term debt Common shares 525 250 255 60 (11) Retained earnings 270 $400 $1,100