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Company purchased 75% of the outstanding common shares and 50% of the outstanding preference shares of Saltines Inc. on January 1, 2019, on which date the balance sheet and fair values of Saltines' assets and liabilities were as follows:
Saltines Inc.
Balance Sheet
as at December 31, 2018
Parrot paid $460,000 for the common shares and $105,000 for the preference shares. The contributed surplus arose from the issue of the preferred shares at a price higher than their stated value. The preferred shares paid cumulative dividends of 5% of their stated value but dividends for 2017 and 2018 were unpaid. The shares were redeemable, at the option of the issuer, at a premium of 8%. The capital assets of Saltines had a remaining useful life of ten years at January 1, 2009. Any unallocated acquisition differential would be treated as goodwill, which is assessed annually for impairment. Parrot accounts for its interest in Saltines using the cost method and accounts for the non-controlling interest in its consolidated financial statements based on the fair value of the subsidiary, proportionate to the price paid for the controlling interest.
Parrot's net income for 2019 was $300,000 and Parrot paid dividends of $150,000 on December 31, 2019. Saltines' net income for 2019 was $120,000 before a loss from discontinued operations of $60,000 (net of tax). Saltines paid dividends of $75,000 in 2019. (Parrot included all dividends received in its income for 2019.) 63. Calculate the consolidated net income of Parrot and its subsidiary as at December 31, 2019.
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64. Parrot has no contributed surplus on its own balance sheet as at the end of 2019. Calculate the amount of the contributed surplus shown on the consolidated balance sheet of Parrot and its subsidiary as at December 31, 2019.
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65. On January 1, 2018, Philcorp acquired 8,000 of the outstanding 10,000 shares of Anderco by issuing its own shares with a market value of $400,000. On June 30, 2019, Anderco issued an additional 2,000 shares for cash consideration of $60 per share, none of which were acquired by Philcorp. Immediately before the issue, the shareholders' equity of Anderco amounted to $500,000 and the unamortized purchase discrepancy was $65,000. Philcorp uses the equity method to record its investment in Anderco.
Required:
What gain or loss will appear in the consolidated financial statements of Philcorp and its subsidiary Anderco as a result of this transaction?
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