Question

Bauerly Co. owned 70% of the voting common stock of Devin Co. During 2012, Devin made frequent sales of inventory to Bauerly. There were unrealized gains of $40,000 in the beginning inventory and $25,000 of unrealized gains at the end of the year. Devin reported net income of $137,000 for 2012. Bauerly decided to use the equity method to account for the investment. What is the non-controlling interest's share of Devin's net income for 2012

Answer 1

Answer:

                                                                         $                            $

Net Income (137000*30%) (a)                                             41,100

Add:  

Unrealized gains in the beginning inventory 40,000  

Unrealized gains at the end of the year         25,000  

Difference                                                         15,000  

(NCI in Unrealized gain (15,000*30%) (b)                             4,500

Non-controlling interest's share of Devin's net income for 2012 ($41,100+$4,500)                                                                    45,600

Non-controlling interest's share of Devin's net income for 2012= $45,600

Explanation: