Paula Company purchased 8,000 of the 10,000 common shares of SandyCo on January 1, 2010. On January
Question:
Paula Company purchased 8,000 of the 10,000 common shares of SandyCo on January 1, 2010. On January 1, 2013, Paula Company sold 1,300 shares from its holding in SandyCo for $60,000.
On this date, and prior to the sale, SandyCo had common shares of $100,000 and retained earnings of $150,000 on its balance sheet. Paula Company accounts for its investment in SandyCo using the equity method; the balance in Paula Company’s investment in subsidiary account on January 1, 2013 was $320,000. The unamor*zed acquisi*on di,eren*al at that date was allocated 40% to land, 40% to equipment with a remaining economic life of four years and 20% to patents with a remaining useful life of eight years.
During 2013, SandyCo reported a net income of $160,000 and declared dividends of $80,000.
Required:
a) What gain or loss would Paula Company report of the sale of the shares and where would it appear in the consolidated 2nancial statements for 2013?
b) What would the balance of noncontrolling interest be, on the consolidated balance sheet as at December 31, 2013?
Financial Management for Decision Makers
ISBN: 978-0138011604
2nd Canadian edition
Authors: Peter Atrill, Paul Hurley