Bogart Corporation purchased 75% of the common stock of Bach Enterprises on Dece
ID: 2797464 • Letter: B
Question
Bogart Corporation purchased 75% of the common stock of Bach Enterprises on December 31, 2012 for $900,000. At that date, Bach had total common stockholders' equity of $1,090,000, and the fair value of the noncontrolling interest was $300,000. All of the differentail was viewed as attributable to equipment with a life of 10 years except for $20,000, which was related to land. Bach reported net income of $80,000 in reported earnings from its own separate operations of $120,000 in 2013 and $150,000 in 2014; Bogart declared dividends of $50,000 in each of the two years.
a) What amount of income (loss) should be assigned to the noncontrolling interest in 2014 ans what is the total noncontrolling interest at the end of 2014?
b) What is the amount of consolidated net income that should be reported for 2013 and 2014?
c) What amount should be reported in the 2014 consolidated retained earnings statement as dividends declared?
d) What amount should be reported as "Differential" in the 2014 consolidated balance sheet?
e) If Bogart reports $89,000 of land in its separate balance sheet at December 31 2014, and Bach reports land of $61,000 at that same date, the total amount reported for land in the December 31, 2014, consolidated balance sheet should be what?
f) If Bogart reports total depreciation expense of $41,000 in its separate 2014 income statement, and Bach reports total depreciation expense of $29,000 in its separate 2014 income statement, consolidated depreciation expense for 2014 should be what?
Explanation / Answer
A.1) Bach reported an income of $80,000 (assumed that $80,000 is earned in each year 2013 & 2014). Bach had total common stockholders' equity of $1,090,000, and the fair value of the noncontrolling interest was $300,000. Hence the ratio between controlling & Non controlling interest is 790:300 ($1090000-$300000= $790000).
therefore, amount of income assigned to the noncontrolling interest in 2014
= $80000*300/1090
= $22018.
A.2) Total noncontrolling interest at the end of 2014:
fair value of the noncontrolling interest = $300,000
Net income earned in 2013 = $ 22018
Net income earned in 2014 = $ 22018
$344036
B) Amount of consolidated net income that should be reported for 2013 and 2014:
since information is provided only of net income of Bach Enterprises & dividend declared Bogart Corporation,
amount of consolidated net income for both the years will be:
$80000 - $50000= $30000.
C) amount to be reported in the 2014 consolidated retained earnings statement as dividends declared is $50000.
D) amount to be reported as "Differential" in the 2014 consolidated balance sheet:
controlling interest less value of land (non depriciable value) (i.e $790000- $20000) $770000
depriciation for 2013 ($ 77000)
depriciation for 2014 ($ 77000)
$616,000