Question

Femur Co. acquired 70% of the voting common stock of Harbor Corp. on January 1, 2019. During 2019, Harbor had revenues of $2,500,000 and expenses of $2,000,000. The amortization of fair value allocations totaled $60,000 in 2019. Not including its investment in Harbor, Femur Co. had its own revenues of $4,500,000 and expenses of $3,000,000 for the year 2019.
The noncontrolling interest's share of the earnings of Harbor Corp. for 2019 is calculated to be:

a.What amount of consolidated net income for 2019 should be allocated to Femur’s controlling interest in Harbor?

b.What amount would Femur Co. report as consolidated net income for 2019?

Answer 1

Answer:

$132,000

a. $308,000

b. $1,808,000

Explanation:

We have to first calculate Harbor’s net income for 2019 as follows:

Harbour’s net income = Harbor’s revenue – Harbor’s expenses – Allocated fair value amortization  

                                    = $2,500,000 - $2,000,000 - $60,000  

Harbour’s net income = $440,000

1. The noncontrolling interest's share of the earnings of Harbor Corp. for 2019 is calculated to be:

Noncontrolling interest’s share of Harbor’s earnings = Harbour’s net income × 30%  

                                                                                        = $440,00 × 30%  

Noncontrolling interest’s share of Harbor’s earnings = $132,000

Therefore, the noncontrolling interest's share of the earnings of Harbor Corp. for 2019 is calculated to be $132,000.

a. What amount of consolidated net income for 2019 should be allocated to Femur’s controlling interest in Harbor?

Femur’s share of Harbour’s net income = Harbour’s net income × 70% = $440,000 × 70% = $308,000

Therefore, the amount of consolidated net income for 2019 that should be allocated to Femur’s controlling interest in Harbor is $308,000.

b. What amount would Femur Co. report as consolidated net income for 2019?

Femur’s net income = Femur’s revenue – Femur’s expenses = $4,500,000 - $3,000,000 = $1,500,000

Femur’s Consolidated Net Income = Femur’s net income + Femur’s share of Harbour’s net income

                                                         = $1,500,000 + $308,000

Femur’s Consolidated Net Income = $1,808,000.

Therefore, the amount that Femur Co. would report as consolidated net income for 2019 is $1,808,000.

Answer 2

Answer:

Explanation:

The noncontrolling interest's share of the earnings of Harbor Corp. for 2019

= ($2,500,000 - $2,000,000- $60,000) * 0.3 = 440,000*0.3 = $132,000

Amount of consolidated net income for 2019 should be allocated to Femur’s controlling interest in Harbor

= $440,000 - $132,000 = $308,000

Amount Femur Co. would report as consolidated net income for 2019:

= $(4,500,000-3,000,000) + $308,000 = $1,500,000 + $308,000 = $1,808,000