Question

Angela, Inc., holds a 90 percent interest in Corby Company. During 2020, Corby sold inventory costing $114,300 to Angela for $127,000. Of this inventory, $43,600 worth was not sold to outsiders until 2021. During 2021, Corby sold inventory costing $153,600 to Angela for $192,000. A total of $50,400 of this inventory was not sold to outsiders until 2022. In 2021, Angela reported separate net income of $168,000 while Corby's net income was $102,000 after excess amortizations. What is the noncontrolling interest in the 2021 income of the subsidiary

Answer 1

Answer: $9628

Explanation:

First, we need to calculate the gross profit which will be:

= $127,000 - $114,300

= $12700

Then, gross profit rate will be:

= Gross profit / Sales × 100

= ($12700 / $127,000) × 100

= 10%

Unrealized profit on $43,600 will be:

= 10% × $43600

= 0.1 × $43600

= $4360

The unrealized profit for 2021 will be calculated as:

= $192,000 - $153,600

= $38400

Then, gross profit rate will be:

= Gross profit / Sales × 100

= ($38400 / $192,000) × 100

= 20%

Unrealized profit on $50,400 will be:

= 20% × $50,400

= 0.2 × $50,400

= $10080

The noncontrolling interest in the 2021 income of the subsidiary will then be:

Income of Corby company = $102000

Add: Deferal of unrealized gross profit = $4360

Less : Unrealized profit on current year = $10080

Adjusted income = $96280

Non controlling interest at 10% will then be:

= 10% × $96280

= 0.1 × $96280

= $9628