Question

Park Co. holds a 80% interest in San Marino Co. During 2019, San Marino sold inventory costing $1,155,000 to Park for $1,650,000. A total of $600,000 of this inventory was not sold to outsiders until 2020. During 2020, San Marino sold inventory costing $1,080,000 to Park for $1,800,000. A total of $750,000 of this inventory was not sold to outsiders until 2021. In 2020, Park reported a net income of $2,250,000 while San Marino reported $1,350,000. What is the noncontrolling interest in the 2020 income of the subsidiary

Answer 1

Answer:

Park Co and San Marino Co.

The noncontrolling interest in the 2020 income of the subsidiary is:

= $270,000.

Explanation:

a) Data and Calculation:

Interest in San Marino Co. = 80%

Cost of 2020 Inventory sold by San Marino to Park = $1,080,000

Sales value of the inventory = $1,800,000

Profit element = $720,000 ($1,800,000 - $1,080,000)

Sales value of unsold inventory = $750,000

Profit element in unsold inventory = $750,00/$1,800,000 * $720,000

= $300,000

Net income of San Marino for 2020 = $1,350,000

Less profit element in unsold inventory  300,000

Adjusted net income =                         $1,050,000

Non-controlling interest (20%)                  210,000 (20% of $1,050,000)

Non-controlling interest (20%) in

unsold inventory =                                     60,000

Total net income attributable to

Non-controlling interest                        $270,000

(which is equal to 20% of the subsidiary's net income)