On September 1, 20X5, High Limited decided to buy 70% of the shares outstanding of Low Inc. for $630,000. High will pay for this acquisition by using cash of $500,000 and issuing share capital for the remaining amount. The balances showing on the statement of financial position for the two companies at August 31, 20X5, are as follows:

\begin{array}{|l|r|r|}\hline &\text { High } & \text { Low } \\&\$ & \$\\\hline\text { Assets }\\\hline \text { Cash } & 525,000 & 40,000 \\\hline \text { Accounts receivable } & 65,000 & 35,000 \\\hline \text { Inventory supplies } & 50,000 & 50,000 \\\hline \text { Land } & 525,000 & 275,000 \\\hline \text { Buildings and equipment } & 3,450,000 & 925,000 \\\hline \text { Accumulated depreciation } & (865,000) & (125,000) \\\hline \text { Total assets } & \underline{3,750,000} & \underline{1,200,000} \\\hline\\\hline \text { Liabilities } & & \\\hline \text { Current liabilities } & & \\\hline \text { Accounts payable } & 665,000 & 280,000 \\\hline \text { Bonds payable } & 1,350,000 & 620,000 \\\hline & 2015,000 & 900,000 \\\hline\\\hline \text { Shareholders' equity } & & \\\hline \text { Common shares } & 950,000 & 250,000 \\\hline \text { Retained earnings } & \underline{785,000} & \underline{50,000} \\\hline \text { Total shareholders' equity } & \underline{1,735,000} & \underline{300,000} \\\hline \text { Total liabilities and shareholders' equity } & \underline{3,750,000} & \underline{\underline{1}, 200,000} \\\hline\end{array}

After a review of the assets and liabilities, High determines that some of the assets of Low have fair values different from their carrying values. These items are listed below:
• Accounts payable had a fair value of $295,000.
• The building has a fair value of $1,090,000. The remaining useful life of the building is 20 years.
• Patent is $80,000. The patent is estimated to have a useful life of five years.
During the 20X7 fiscal year, the following events occurred:
1. On March 1, 20X7, Low sold land to High for $390,000, which had a carrying value of $275,000. High paid for this with $90,000 cash and a note payable for the difference. This note pays interest at 10%, which is paid monthly.
2. High sold inventory to Low for $300,000. Profit margin on these sales is 25%. Low still has inventory on hand of $80,000.
3. In 20X6, Low had provided inventory to High for a value of $600,000. This amount was included in sales for Low. Profit margin on these sales is 35%. At the end of August, 20X6, High still had an amount of $200,000 in these prepaid seats that had not yet been used.

\begin{array}{c}\text { Statement of Financial Position }\\\text { August \( 31,20 \times 7 \)}\\\\\begin{array}{|l|c|c|}\hline &\text { High } & \text { Low } \\&\$ & \$\\\hline\text { Assets }\\\hline \text { Cash } & 490,000 & 10,000 \\\hline \text { Accounts receivable } & 85,000 & 25,000 \\\hline \text { Inventory } & 260,000 & 80,000 \\\hline \text { Note receivable-High } & & 300,000 \\\hline \text { Investment in Low } & 630,000 & \\\hline \text { Land } & 915,000 & \\\hline \text { Buildings and equipment } & 3,745,000 & 1,610,000 \\\hline \text { Accumulated depreciation } & (1,865,000) & (675,000) \\\hline \text { Total assets } & 4,260,000 & 1,350,000 \\\hline\\\hline \text { Liabilities } & & \\\hline \text { Current liabilities } & & \\\hline \text { Accounts payable } & 855,000 & 580,000 \\\hline \text { Bonds payable } & 850,000 & 820,000 \\\hline \text { Note payable to Low } & \underline{300,000} & \underline{0} \\\hline&2,005,000&1,400,000\\\hline \text { Shareholders' equity } & & \\\hline \text { Common shares } & 1,080,000 & 250,000 \\\hline \text { Retained earnings (deficit) } & \underline{1,175,000} & \underline{(300,000)} \\\hline \text { Total liabilities and shareholders' equity } & \underline{4,260,000} & \underline{1,350,000} \\\hline\end{array}\end{array}

\begin{array}{c}\text { Statement of Comprehensive Income }\\\text { Year Ended August 31, \( 20 \times 7 \)}\\\\\begin{array}{|l|r|r|}\hline &\text { High } & \text { Low } \\&\$ & \$\\\hline\text { Sales } & 6,560,000 & 1,540,000 \\\hline \text { Gain on sale of land } & 0 & 115,000 \\\hline \text { Interest income } & 0 & 15,000 \\\hline & 6,560,000 & 1,670,00 \\\hline \text { Cost of sales } & 4,980,000 & 1,030,000 \\\hline \text { Depreciation and amortization expenses } & 250,000 & 125,000 \\\hline \text { Interest expense } & 15,000 &\\\hline \text { Management fees } & & \\\hline \text { Other expenses } & 565,000 & \underline{1.040,000} \\\hline & \underline{5,810,000} & \underline{2,195,000} \\\hline \text { Net income(loss) } & \underline{Z 50,000} & \underline{(525,000}) \\\hline\end{array}\end{array}

Required:
Calculate the balances for the following consolidated balances of High at August 31, 20X7, assuming High uses the entity approach:
a. Goodwill
b. Non-controlling interest
c. Buildings and equipment, net

In Preparing Consolidation Working Papers, Why Is It Necessary to Eliminate

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