Question

On January 1, 2014, P Company purchased an 80% interest in S Company for $616,800, at which time S Company had retained earnings of $295,600 and common stock of $340,300. Any difference between book value and the value implied by the purchase price was entirely attributable to a patent with a remaining useful life of 10 years. Assume that P and S Companies reported net incomes from their independent operations of $199,900 and $95,700, respectively. Calculate the controlling interest and noncontrolling interest in consolidated net income for the year ended December 31, 2014.

Answer 1

Answer:

For the year ended December 31, 2014, we have:

Controlling interest in consolidated net income = $76,560

Noncontrolling interest in consolidated net income = $19,140

Explanation:

This can be calculated as follows:

Net income of S Company = $95,700

Controlling interest percentage = P Company percentage interest in S Company = 80%

Noncontrolling interest percentage = 100% - Controlling interest percentage = 100% - 80% = 20%

Therefore, we have:

Controlling interest in consolidated net income of S Company = Controlling interest percentage * Net income of S Company = 80% * $95,700 = $76,560

Noncontrolling interest in consolidated net income of S Company = Noncontrolling interest percentage * Net income of S Company = 20% * $95,700 = $19,140

Therefore, for the year ended December 31, 2014, we have:

Controlling interest in consolidated net income = $76,560

Noncontrolling interest in consolidated net income = $19,140