Question
In: Accounting
Angela, Inc., holds a 90 percent interest in Corby Company. During 2017, Corby sold inventory costing...
Angela, Inc., holds a 90 percent interest in Corby Company. During 2017, Corby sold inventory costing $111,200 to Angela for $139,000. Of this inventory, $52,600 worth was not sold to outsiders until 2018. During 2018, Corby sold inventory costing $123,900 to Angela for $177,000. A total of $69,400 of this inventory was not sold to outsiders until 2019. In 2018, Angela reported separate net income of $237,000 while Corby's net income was $130,500 after excess amortizations.
What is the noncontrolling interest in the 2018 income of the subsidiary?
Multiple Choice
-
$174,500.
-
$173,300.
-
$214,200.
-
$183,200.
Solutions
Expert Solution
ANSWER=
(A) Computation of Unrealized Gross Profit:-
| Particular | Amount |
| Ending inventory on 2017 | $52600 |
|
Gross Profit rate $139000 - $111200 / $139000 x 100 |
20% |
| Unrealized Gross Profit on - 31 Dec -2017=($52600 x 20%) | $10520 |
| Ending inventory on 2018 | $69400 |
|
Gross Profit rate $177000 - $123900 / $177000 x 100 |
30% |
| Unrealized Gross profit - 31 Dec-2018 =($69400 x 30%) | $20820 |
(B) Computation of Non-controlling interest in 2018 income of Subsidiary as follows:-
Reported Net income for 2018 (Given) = $130500
Add:- Realized Gross profit deferred in 2017 = $10520
Less:- Deferral of Unrealized gross profit of 2018 = $20820
Realized Net income of Subsidiary = $120200
Therefore:-
Non-Controlling interest i.e. Outside ownership = 10%(100% -90% i.e. Angela & inc stake)
= $120200 x 10%
=$12020 (Final Answer)
Remark:-
According to given options in aforementioned question there is no way to match final answer to these options, because total income of Subsidiary Corby after all adjustment is $120200 which is 100% and NCI's Part is only 10% out of them which is $120200 x 10% = $12020, which is the requirement of the question.
ekkarill92 answered 2 years agoRelated Solutions
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