Question

Punch Corporation acquired 80% ownership of Jud Corporation in 2017, at underlying book value. On that date, the fair value of noncontrolling interest was equal to 20% of the book value of Judy. Punch purchased inventory from Judy for $75,000 on August 15, 2018, and resold 80% of the inventory to unaffiliated companies on December 2, 2018, for $100,000. Judy produced the inventory sold to Punch for $50,000. The companies had no other transactions during 2018. Based on the information given above, what amount of consolidated net income will be assigned to the controlling interest for 2018?

Answer 1

Answer:

The amount of consolidated net income that will be assigned to the controlling interest for 2018 is $ 48,000.

Explanation:

In order to calculate consolidated net income profit and loss on intra group transactions are eliminated or not taken into account. So in order to calculate profit cost incurred by group is taken as cost of good sold and sales that is made to third party will be taken as revenue. Detail calculations are given below.

Revenue           $ 100,000

COGS               ($   40,000)      (50,000 *80%)

Profit                 $   60,000-A

Consolidated net income controlling interest = A * 80% = $ 48,000