Saturn Ltd a Canadian company purchased 100 of the common
Saturn Ltd., a Canadian company, purchased 100% of the common shares of a New Zealand company, Tethys Ltd., on December 31, 2012, for NZ$125,000 (New Zealand dollars). The entire purchase discrepancy was attributed to a patent that was not recognized in Tethys's accounts. The patent had a remaining useful life of three years. Tethys's functional currency is the Canadian dollar. Tethys's comparative balance sheet information at December 31, 2012, and 2013, and its income statement for the year ended December 31, 2013, are as follows:
Additional information:
1. Equipment was purchased on April 23, 2013, when the exchange rate was NZ$1 = C$0.72. The equipment cost NZ$50,000.
2. Sales and other expenses occurred evenly throughout the year.
3. A dividend of NZ$4,000 was declared and paid on December 31, 2013.
4. Exchange rates are as follows:
December 31, 2012 ......... NZ$1 = C$0.70
December 31, 2013 ......... NZ$1 = C$0.76
Average for 2013 ......... NZ$1 = C$0.73
5. The account history of property, plant, and equipment (PPE) and accumulated depreciation from December 31, 2012, to December 31, 2013 (in NZ$), was as follows:
(a) Prepare Tethys's 2013 income statement in Canadian dollars (including the exchange difference, if applicable).
(b) Saturn has no patents of its own. Calculate the amount for patent amortization in Saturn's 2013 consolidated income statement and the December 31, 2013, balance in the patent account on Saturn's consolidated balance sheet.
(c) Recalculate the requirements from part (b), assuming that Tethys's functional currency is the New Zealand dollar.
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