Required: Prepare a consolidated balance sheet for the acquisition date (Jan 1, 2018), using the parent company extension theory. Prepare a consolidated income statement for the year ended Dec 31, 2018, and a R/E statement as of Dec 31, 2018, using the parent company extension theory.

Answers to the question are based on the following information.

FAAT Inc. purchased 70% of 20,000 outstanding voting shares of HFP Inc. for $616,000 cash on Jan 1, 2018. On that day, the market price for HFPs shares is $18.4. Both parties agreed that the equipment had a remaining useful life of 5 years from the date of acquisition. HFPs bank loan will mature on January 1, 2023. The balance sheets of both companies right before the acquisition date, as well as HFPs fair market values on the acquisition date, are below:

In addition, both companies use a FIFO system, and HFPs inventories on the date of acquisition were all sold to outsiders of the combined entity during the year following the acquisition. Both companies have Dec 31 as the year-end for financial reporting. FAAT uses the cost method to account for its equity investments. The management of FAAT decided to write off $1,000 impairment for the goodwill associated with the acquisition on Jan. 1, 2018, for consolidation.

The followings are the financial statements of the two companies for the fiscal year ended December 31, 2018:

CashAccountsReceivableInventoryEquipmentAccumulatedamortizationLandGoodwillTotalAssetsCurrentLiabilitiesBankloanCommonSharesRetainedEarningsTotalLiabilitiesandEquityFAATInc.$1,450,000$100,000$60,000$80,000(30,000)40,000$1,700,000$100,000$260,000$800,000$540,000HFPInc.$315,000$85,000$45,000$95,000(15,000)$105,000$10,000$640,000$280,000$80,000$210,000$70,000$640,000FairValue$315,000$85,000$40,000$90,000$188,000$280,000$70,000 LAAT Inc. NFP Inc. Income Statements: SalesDividendsRevenue$831,500$3,500$300,000 Less: Expenses: Retained Earnings Statements: Balance,Jan.12018NetIncomeLess:DividendsBalance,Dec.31,2018$540,000$563,000($10,000)$1,093,000$70,000$50,000($5,000)$115,00