Answer Happy

On December 31, 2013, Poplar Inc. purchased 80% of the 600,000
outstanding common shares of Spruce Ltd for $5.4 million in cash.
On that date, the shareholders’ equity of Spruce totalled $6
million and consisted of $1 million in common shares, $1 million in
contributed surplus and $4 million in retained earnings. On
December 31, 2013, Spruce had a plot of land with a fair value that
was $100,000 greater than its carrying value, equipment (with a
remaining life of 6 years) with a fair value that was $120,000
greater than its carrying value and long-term debt maturing on
December 31, 2021 with a fair value that was $200,000 greater than
its book value. Any remaining purchase discrepancy was allocated to
goodwill which was assessed annually for impairment.
For the year ended December 31, 2019, the condensed income
statements for the two companies were as follows:
Poplar Inc.
Spruce Ltd.
Sales and other revenue
$ 12,500,000
$ 5,600,000
Cost of goods sold
8,000,000
4,000,000
Amortization expense
1,500,000
1,000,000
Other expenses
1,100,000
1,400,000
Income tax expense
700,000
(200,000)
Net income (loss)
$ 1,200,000
$ (600,000)
At December 31, 2019, the condensed balance sheets of the two
companies were as follows:
Poplar Inc.
Spruce Ltd.
Total assets
$ 29,000,000
$ 11,100,000
Liabilities
5,000,000
1,200,000
Common shares
11,000,000
1,000,000
Contributed surplus
1,100,000
1,000,000
Retained earnings
11,900,000
7,900,000
$ 29,000,000
$ 11,100,000
Other information:
Required: