On January 1, Year 4, Grant Corporation bought 10,000 (80%) of the outstanding common shares of Lee Company for $87,500 cash.Lee's shares were trading for $7 per share on the date of acquisition. On that date, Lee had $31,250 of common shares outstandingand $37,500 retained earnings. Also on that date, the carrying amount of each of Lee's identifiable assets and liabilities was equal toits fair value except for the following:InventoryPatentCarrying Amount$62,50012,500AssetsCashThe patent had an estimated useful life of five years at January 1, Year 4, and the entire inventory was sold during Year 4. Grant usesthe cost method to account for its investment.The following are the separate-entity financial statements of Grant and Lee as at December 31, Year 7:Accounts receivableInventoryInvestment in LeeEquipment, netPatent, netLiabilities and Shareholders' EquityAccounts payableOther accrued liabilitiesIncome taxes payable:Common sharesRetained earningsFair Value$68,75025,000SalesCost of goods soldGross marginDistribution expenseBALANCE SHEETSAt December 31, Year 7Other expensesIncome tax expenseNet incomeAdditional InformationINCOME STATEMENTYear ended December 31, Year 7Grant$1,125,000$(425,000)700,000(37,500)(225,000)(150,000)$ 287,500Grant87,500287,500$1,000,000$ 237,500 $243,75075,00062,50090,00031,25081,250$1,000,000 $508,7506,250231,250$22,500102,500387,500 125,000Retained earnings on acquisitionIncreaseGrant's shareLess: Changes to acquisition differential.100,000212,500375,000LeeLee$450,000256,2502,500$508,750The recoverable amount for goodwill was determined to be $12,500 on December 31, Year 7. The goodwill impairment loss occurredin Year 7.Grant's accounts receivable contains $37,500 owing from Lee.. Amortization expense is grouped with distribution expenses and impairment losses are grouped with other expenses.(300,000)150,000(31,250)(70,000)(20,000)28,750Required:(a) Calculate consolidated retained earnings at December 31, Year 7. (Input all values as positive numbers. Omit $ sign in yourresponse.)$Calculation of consolidated retained earnings- Dec 31, Year 7Retained earnings - Grant$Retained earningsLee$(b) Prepare consolidated financial statements for Year 7. (Input all values as positive numbers.) es(b) Prepare consolidated financial statements for Year 7. (Input all values as positive numbers.)Gross marginTotalAttributable to:Grant's shareholdersNon-controlling interestGrant CorporationConsolidated Income StatementYear ended December 31, Year 7Grant CorporationConsolidated Balance Sheet- December 31, Year 7AssetsLiabilities and Equity4+

Consolidated Financial Statements: It is a financial statement of a parent company and its…

On January 1, Year 4, Grant Corporation bought 10,000 (80%) of the outstanding common shares of Lee Company for $87,500 cash. Lee's shares were trading for $7 per share on the date of acquisition. On that date, Lee had $31,250 of common shares outstanding and $37,500 retained earnings. Also on that date, the carrying amount of each of Lee's identifiable assets and liabilities was equal to its fair value except for the following: Inventory Patent Carrying Amount $62,500 12,500 Assets Cash The patent had an estimated useful life of five years at January 1, Year 4, and the entire inventory was sold during Year 4. Grant uses the cost method to account for its investment. The following are the separate-entity financial statements of Grant and Lee as at December 31, Year 7: Accounts receivable Inventory Investment in Lee Equipment, net Patent, net Liabilities and Shareholders' Equity Accounts payable Other accrued liabilities Income taxes payable: Common shares Retained earnings Sales Cost of goods sold Gross margin Distribution expense BALANCE SHEETS At December 31, Year 7 Other expenses Income tax expense Net income Fair Value $68,750 25,000 Additional Information $ INCOME STATEMENT Year ended December 31, Year 7 Grant $1,125,000 (425,000) 700,000 (37,500) (225,000) (150,000) $ 287,500 $ Grant Retained earnings - Grant Retained earnings - Lee 6,250 $22,500 102,500 125,000 231,250 387,500 Retained earnings on acquisition Increase 87,500 287,500 $1,000,000 $ 237,500 75,000 100,000 212,500 375,000 $1,000,000 Lee 256,250 2,500 $588,750 $243,750 62,500 90,000 31,250 81,250 $508,750 . The recoverable amount for goodwill was determined to be $12,500 on December 31, Year 7. The goodwill impairment loss occurred in Year 7. Lee $ 450,000 (300,000) 150,000 (31,250) (70,000) (20,000) 28,750 • Grant's accounts receivable contains $37,500 owing from Lee. . Amortization expense is grouped with distribution expenses and impairment losses are grouped with other expenses. Required: (a) Calculate consolidated retained earnings at December 31, Year 7. (Input all values as positive numbers. Omit $ sign in your response.) Calculation of consolidated retained earnings- Dec 31, Year 7