QUESTION 2 Partially correct 2.00 points out of 4.00P Flag question Income attri
ID: 2549478 • Letter: Q
Question
QUESTION 2 Partially correct 2.00 points out of 4.00P Flag question Income attributable to controlling and noncontrolling interests in the presence of subsidiary preferred stock Assume that a Parent owns 90% of a subsidiary that has 4% preferred stock outstanding with a reported par value of $875,000. Aside from the preferred dividends, no other dividends are paid (i.e., no dividends are paid to the common shareholders). The Parent Company owns 40 percent of the preferred stock. Assume that the Subsidiary reports net income of $245,000. During the year, the Parent company reported $350,000 of (pre-consolidation) income from its own operations (i.e., prior to any equity method adjustments by the Parent company) Compute the amount of consolidated net income attributable to the noncontrolling interest and the amount of net income attributable to the controlling interest. Attributable to the controlling interest189,000x Attributable to the non-controlling interest 21,000 CheckExplanation / Answer
Consolidated net income attributable to the controlling interest is $ 553,000
Consolidated net income attributable to the non-controlling interest is $ 21,000
Workings :-
Net income of subsidiary before preferred dividend = $ 245,000
Preferred Dividend is $ 875,000 x 4% = $ 35,000
Net income of subsidiary after preferred dividend = $ 210,000
Pre - consolidation income of parent company = 350,000 (A)
Share of income of subsidiary 90% x 210,000 = 189,000 (B)
Consolidated net income attributable to controlling interest = 539,000 (A) + (B)
ConsolidatedNet income attributable to non controlling interest = 210,000 x 10% = 21,000