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The following financial statements were prepared on December 31, Year 6:

*Additional Information:*

Pearl purchased 80% of the outstanding voting shares of Silver for $3,300,000 on July 1, Year 2, at which time Silver’s retained earnings were $445,000 and accumulated depreciation was $69,000. The acquisition differential on this date was allocated as follows:

- 20% to undervalued inventory;
- 40% to equipment with a remaining useful life of 8 years;
- the balance to goodwill.

Pearl accounts for its investment in Silver using the cost method and values the non-controlling interest in its subsidiary based on its fair value on the acquisition date, proportionate to the price paid for its controlling interest.

During Year 3, a goodwill impairment loss of $79,000 was recognized, and an impairment test conducted as at December 31, Year 6, indicated that a further loss of $29,000 had occurred.

Amortization expense is to be grouped with cost of goods sold.

Silver owes Pearl $84,000 on December 31, Year 6.

**Required:**

- Prepare consolidated financial statements on December 31, Year 6.
- Calculate goodwill impairment loss and non-controlling interest on the consolidated income statement for the year ended December 31, Year 6, under the parent company extension theory.
- Calculate goodwill and non-controlling interest on the consolidated balance sheet as at December 31, Year 6, under the parent company extension theory.

Silver 190,000 $ BALANCE SHEETS Pearl Cash $ 390,000 Accounts receivable 290,000 Inventory 2,450,000 Plant and equipment 3,450,000 Accumulated depreciation (840,000) Investment in Silver Company, at cost 3,300,000 $ 9,040,000 Liabilities $ 737,000 Common shares 3,750,000 Retained earnings 4,553,000 $ 9,040,000 510,000 3,590,000 (400,000) $ $ 3,890,000 543,000 2,050,000 1,297,000 3,890,000 $ $ 1,450,000 INCOME STATEMENTS Sales $ 4,450,000 Dividend income 232,000 4,682,000 Cost of sales 2,590,000 Miscellaneous expenses 365,000 Administrative expenses 89,000 Income tax expense 295,000 3,339,000 Net income $ 1,343,000 1,450,000 490,000 79,000 19,000 165,000 753,000 697,000 $ STATEMENTS OF RETAINED EARNINGS $ $ Balance, January 1 Net income Dividends declared Balance, December 31 3,800,000 1,343,000 (590,000) 4,553,000 890,000 697,000 (290,000) 1,297,000 $ $

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