On October 1, 20X5, XYZ Ltd. sold its 80% interest in the subsidiary, Sub Ltd., for $2,430,000. Prior to the date of sale, XYZ Ltd. had recorded the investment in a subsidiary account on the cost basis, which showed $1,100,000. At the date of sale, the consolidated entity had a residual unamortized fair value increment relating to capital assets (from the original fair value increment) of $260,000, and goodwill arising from the acquisition of the subsidiary of $148,500. Annual tests have indicated no impairment of goodwill since the date of acquisition. There were no intercompany transactions between the parent and the subsidiary.

At the date of the sale, October 1, 20X5, the SFP of Sub Ltd. was:

XYZ Ltd.€™s 20X4 and 20X5 consolidated statements of financial position were as follows:

The net income for the year for the consolidated entity was $371,200, but this was after the gain on the sale of the subsidiary. No dividends were paid. The consolidated depreciation expense was $104,000, which included the depreciation of the capital asset revaluation. Ignore the impact of income taxes on the sale.

Required
Calculate the gain or loss on the sale of the subsidiary.

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Sub Ltd. October 1, 20X5 Net carrying value $ 110,000 Fair market value Cash $110,000 Receivables 180,000 180,000 Inventory 510,000 570,000 Capital assets, net 880,000 950,000 $1,750,000 $ 124,000 Current liabilities 124,000 Common shares 300,000 Retained earnings 1,006,000 Income: January 1–October 31, 20X5 320,000 $1,750,000 XYZ Ltd. Consolidated Statement of Financial Position December 31 20X4 20X5 Cash $ 256,000 $1,420,000 Receivables 368,000 246,000 Inventory 742,000 538,000 Capital assets, net 1,720,000 845,000 Goodwill 160,000 $3,246,000 $3,049,000 $ 115,000 Current liabilities $ 422,000 Non-controlling interest 261,200 Common shares Retained earnings 500,000 500,000 2,062,800 2,434,000 $3,246,000 $3,049,000