The X Company purchased 80% of the outstanding voting shares of the Y Company for $3,300,000 on July 1^st. 2018, at which time Ys retained earnings were $445,000 , accumulated depreciation $69,000 and common stock $2,050,000.

Below is the financial statements for the year ending December 31^st.2022:-

BALANCE SHEETS

As at December 31^st.2022

XY

Cash$ 390,000.$ 190,000

Accounts receivable. 290,0000.

Inventory..2,450,000. 510,000

Plant and equipment3,450,000.3,590,000

Accumulated depreciation( 840,000).( 400,000)

Investment in the Y Company at cost.3,300,000

TOTAL ASSETS$9,040,000..$3,890,000

Liabilities.$ 737,000$ 543,000

Common Stock 3,750,000..2,050,000

Retained Earnings 4,553,000...1,297,000

TOTAL LIABILITIES & OWNERS EQUITY$9,040,000$3,890,000

INCOME STATEMENTS

For the Year ending December 31^st.2022

X...Y

Sales.$4,,450,000..$1,450,000

Dividend income 232,000

$ 4,682,000$1,450,000

Cost of sales. 2,590,000.. 490,000

Miscellaneous expenses.. 365,000.. 79,000

Administrative expenses... 89,000. 19,000

Income tax expense. 295,000. 165,000

3,339,000 735,000

NET INCOME..$1,343,000.$ 697,000

RETAINED EARNINGS STATEMENTS

XY

Balance, January 1, 2022.$3,800,000..$ 890,000

Net Income..1,343,000 697,000

5,143,0001,587,000

Dividends 590,000290,000

Retained Earnings, December 31^st.2022.$4,553,000.$1,297,000

Additional Information:-

i. The inventory was undervalued by an amount which was equal to 20% of the acquisition differential and equipment by 40% with a remaining life of 8 years.

ii. During 2019, a goodwill impairment loss of $79,000 was recognized, and an impairment test conducted as at December 31^st. 2022 indicated a further impairment loss of $29,000 had occurred.

iii. Amortization expense is grouped with cost of goods sold and impairment losses are grouped with administrative expenses.

iv. Y owes X $84,000 on December 31^st.2022.

Required:-

ii. Prepare:-

a. Consolidated Net Income Statement for year ending December 31^st.2022(4 marks)

b. Consolidated Retained Earnings at January 1^st.2022(5 marks)

c. Consolidated Retained Earnings at December 31^st.2022((3 marks)