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Paper Corp. purchased 70% of the outstanding shares of Sand Ltd. on January 1, Year 2, at a cost of $83,090. Paper has always used the equity method to account for its investments. On January 1, Year 2, Sand had common shares of $50,000 and retained earnings of $25,800, and fair values were equal to carrying amounts for all its net assets, except inventory (fair value was $4,200 less than carrying amount) and equipment (fair value was $12,900 greater than carrying amount). The equipment, which is used for research, had an estimated remaining life of six years on January 1, Year 2.

The following are the financial statements of Paper Corp. and its subsidiary Sand Ltd. as at December 31, Year 5:

BALANCE SHEETS
At December 31, Year 5
	Paper		Sand
Cash	$			$	17,000
Accounts receivable		39,500			29,200
Note receivable					39,700
Inventory		76,500			47,500
Equipment (net)		257,000			79,500
Land		176,000			37,000
Investment in Sand		122,206
	$	671,206		$	249,900
Bank indebtedness	$	130,760		$
Accounts payable		64,000			62,400
Notes payable		39,700
Common shares		150,000			50,000
Retained earnings		286,746			137,500
	$	671,206		$	249,900

INCOME STATEMENTS
For the year ended December 31, Year 5
	Paper		Sand
Sales	$	826,000		$	321,600
Management fee revenue		19,200
Equity method income from Sand		1,674
Interest income					3,970
Gain on sale of land					23,700
		846,874			349,270
Cost of sales		495,600			214,400
Research and development expenses		43,500			14,800
Interest expense		15,600
Miscellaneous expenses		113,000			26,800
Income taxes		71,560			37,308
		739,260			293,308
Net income	$	107,614		$	55,962

Additional Information

• During Year 5, Sand made a cash payment of $1,600 per month to Paper for management fees, which is included in Sands Miscellaneous expenses.
• During Year 5, Paper made intercompany sales of $80,000 to Sand. The December 31, Year 5, inventory of Sand contained goods purchased from Paper amounting to $24,000. These sales had a gross profit of 35%.
• On April 1, Year 5, Paper acquired land from Sand for $39,700. This land had been recorded on Sands books at a carrying amount of $16,000. Paper paid for the land by signing a $39,700 note payable to Sand, bearing yearly interest at 10%. Interest for Year 5 was paid by Paper in cash on December 31, Year 5. This land was still being held by Paper on December 31, Year 5.
• The value of consolidated goodwill remained unchanged from January 1, Year 2, to July Year 5. On July 1, Year 5, a valuation was performed, indicating that the recoverable amount of consolidated goodwill was $4,200.
• During the year ended December 31, Year 5, Paper paid dividends of $80,000 and Sand paid dividends of $20,000.
• Sand and Paper pay taxes at a 40% rate. Assume that none of the gains or losses were capital gains or losses.

Required:

(a) Prepare, in good form, a calculation of goodwill and any undepleted acquisition differential as of December 31, Year 5. (Negative amounts should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required. Omit $ sign in your response.)

	Balance		Changes to		Balance
	January 1, Year 2		Year 2-4		Year 5		Dec. 31, Year 5
Inventory		$			$			$			$
Equipment
Goodwill
		$			$			$			$

(b) Prepare Papers consolidated income statement for the year ended December 31, Year 5, with expenses classified by function. (Round your answer to nearest whole dollar.)

(c) Calculate the following balances that would appear on Papers consolidated balance sheet as at December 31, Year 5: (Leave no cells blank - be certain to enter "0" wherever required. Omit $ sign in your response.)

(i) Inventory $

(ii) Land $

(iii) Notes payable $

(iv) Non-controlling interest $

(v) Common shares $

(d) Assume that an independent business valuator valued the non-controlling interest at $33,150 at the date of acquisition. Calculate goodwill impairment loss and profit attributable to non-controlling interest for the year ended December 31, Year 5. (Omit $ sign in your response.)

Goodwill impairment loss		$
Profit attributable to non-controlling interest		$

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