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Paper Corp. purchased $70\%of$ the outstanding shares $of$ Sand $Ltd.on$ January $1,$ Year $2,at$ a cost $of$ $$88,690.$ Paper has always used the equity method $to$ account for its investments. $On$ January $1,$ Year $2,$ Sand had common shares $of$ $$50,000$ and retained earnings $of$ $$27,400,$ and fair values were equal $to$ carrying amounts for all its net assets, except inventory $(fair$ value was $$4,600$ less than carrying amount$)$ and equipment $(fair$ value was $$14,700$ 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 $Ltd.asat$ December $31,$ Year $5$:

BALANCE SHEETSAt December $31,$ Year $5$ Paper SandCash$$-$ $$19,000$Accounts receivable $41,00030,600$Note receivable $-35,800$Inventory $79,50048,500$Equipment $(net)271,00080,500$Land $182,00039,000$Investment $in$ Sand $132,524-$ $$706,024$ $$253,400$Bank indebtedness$$147,580$ $$-$Accounts payable $68,00060,900$Notes payable $35,800-$Common shares $150,00050,000$Retained earnings $304,644142,500$ $$706,024$ $$253,400$

INCOME STATEMENTSFor the year ended December $31,$ Year $5$ Paper SandSales$$834,000$ $$327,000$Management fee revenue $21,600-$Equity method income from Sand $1,133-$Interest income $-3,580$Gain $on$ sale $of$ land $-17,800856,733348,380$Cost $of$ sales $500,400218,000$Research and development expenses $44,50015,600$Interest expense $17,200-$Miscellaneous expenses $115,00029,200$Income taxes $72,00034,232749,100297,032$Net income$$107,633$ $$51,348$

Additional Information

During Year $5,$ Sand made a cash payment $of$ $$1,800$ per month $to$ Paper for management fees, which $is$ included $in$ Sand$s$ Miscellaneous expenses.

During Year $5,$ Paper made intercompany sales $of$ $$20,000to$ Sand. The December $31,$ Year $5,$ inventory $of$ Sand contained goods purchased from Paper amounting $to$ $$6,000.$ These sales had a gross profit $of35\%.$

$On$ April $1,$ Year $5,$ Paper acquired land from Sand for $$35,800.$ This land had been recorded $on$ Sand$s$ books $at$ a carrying amount $of$ $$18,000.$ Paper paid for the land $by$ signing $a$ $$35,800$ note payable $to$ Sand, bearing yearly interest $at10\%.$ 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 $$4,400.$

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 $ata40\%$ 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 $asof$ 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 Paper$s$ 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 $on$ Paper$s$ consolidated balance sheet $asat$ December $31,$ Year $5$: $(Leaveno$ 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 $at$ $$34,050at$ 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 $

$1$ Additional Information

During Year $5,$ Sand made a cash payment $of$ $$1,800$ per month $to$ Paper for management fees, which $is$ included $in$ Sand's

Miscellaneous expenses.

During Year $5,$ Paper made intercompany sales $of$ $$20,000to$ Sand. The December $31,$ Year $5,$ inventory $of$ Sand contained goods

purchased from Paper amounting $to$ $$6,000.$ These sales had a gross profit $of35\%.$

$On$ April $1,$ Year $5,$ Paper acquired land from Sand for $$35,800.$ This land had been recorded $on$ Sand's books $at$ a carrying amount

$of$ $$18,000.$ Paper paid for the land $by$ signing $a$ $$35,800$ note payable $to$ Sand, bearing yearly interest $at10\%=V_m=4$

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