Question

Assume that on January 1, 2012, a parent company acquired a 70% interest in a subsidiary's voting common stock. On the date of acquisition, the fair value of the subsidiary's net assets equaled their reported book values except for machinery and equipment, which had a fair value of $480,000 and a reported book value of $250,000. The machinery and equipment had a 5 year remaining useful life and no salvage value. The following are the highly summarized pre-consolidation income statements of the parent and subsidiary for the year ended December 31 , 2013:
Income Statement Parent Subsidiary
Revenues $2,160,000 $288,000
Equity income 60,200
Expenses 1440000 144,000
Net income $780,200 144,000

For the year ended December 31, 2013, what amounts will be reported for (1) consolidated net income and (2) net income attributable to the non-controlling interest, respectively, in the parent's consolidated financial statements?

Answer 1

Answer: 1. $818,000

2. Check attachment

Explanation:

1. The amounts that will be reported for consolidated net income will be $818,000.

(2) Note that for the net income attributable to the non-controlling interest, respectively, in the parent's consolidated financial statements was calculated as:

= ($144,000 - $46,000) × 30%

= $98,000 × 0.3

= $29400

Kindly check the attachment for more analysis.