Question

Assume that a Parent owns 80 percent of a Subsidiary that has 6 percent preferred stock outstanding with a reported par value of $720,000. Aside from the preferred dividends, no other dividends are paid (i.e., no dividends are paid to the common shareholders). The Parent owns none of the preferred stock. Assume that the Subsidiary reports net income of $117,000. During the year, the Parent company reported $261,000 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.

Answer 1

Answer:

Consolidated net income attributable to the noncontrolling interest $14,760

Consolidated net income attributable to the controlling interest $320,040

Explanation:

Computation of the amount of consolidated net income attributable to the noncontrolling interest and the amount of net income attributable to the controlling interest.

CONSOLIDATED NET INCOME attributable to the noncontrolling interest

First step is to find the Divide amount

Dividend =6% x $720,000

Dividend= $43,200

Second Step is to find the Net Income from Subsidiary

Net Income from Subsidiary= $117,000-$43,200

Net Income from Subsidiary=$73,800

Last step is to calculate consolidated net income attributable to the noncontrolling interest

Noncontrolling interest =$73,800 x 20%

Noncontrolling interest = $14,760

NET INCOME attributable to the controlling interest

First step is to find the controlling interest amount

Controlling interest=80% x $73,800

Controlling interest= $59,040

Last step is to find the Parent company income

Parent company income= $261,000 + $59,040

Parent company income= $320,040

Therefore Consolidated net income attributable to the noncontrolling interest is $14,760 while the Consolidated net income attributable to the controlling interest is $320,040