Exercise 5-5 Your answer is incorrect. Try again. On January 1, 2014, P Company
ID: 2580122 • Letter: E
Question
Exercise 5-5 Your answer is incorrect. Try again. On January 1, 2014, P Company purchased an 80% interest in S Company for $617,600, at which times Company had retained earnings of $309,000 and common stock of $334,000. Any difference between book value and the value implied by the purchase price was entirely attributable to a patent with a remaining useful life of 10 years. Assume that P and S Companies reported net incomes from their independent operations of $200,700 and $95,600, respectively. Calculate the controlling interest and noncontrolling interest in consolidated net income for the year ended December 31, 2014,. Controlling Interest in Consolidated Net Income Noncontrolling Interest in Consolidated Net Income $Explanation / Answer
Book Value of S Company as on January 1, 2014 Common stock 334000 Retained Earnings 309000 Total 643000 80% of above is owned by P Company 514400 Purchase price 617600 Patent 103200 To be amortized over a period of 10 years 10320 Controlling & Noncontrolling Interest in Consolidated net Income Net Income of P Company 200700 Net Income of S Company 95600 Total 296300 Less : Patent amortization 10320 Total Net Income 285980 Total Net Income attributable to Non controlling Interest 19120 = 20% of Net Income of S company Balance -Conrolling Interest 266860