Question

Boulder, Inc., obtained 90 percent of Rock Corporation on January 1, 2016. Annual amortization of $22,600 is applicable on the allocations of Rock's acquisition-date business fair value. On January 1, 2017, Rock acquired 75 percent of Stone Company's voting stock. Excess business fair-value amortization on this second acquisition amounted to $9,000 per year. For 2018, each of the three companies reported the following information accumulated by its separate accounting system. Separate operating income figures do not include any investment or dividend income.

	Separate Operating Income	Dividends Declared
Boulder	$275,500	$118,000
Rock	95,500	27,000
Stone	160,000	39,000

1. What is consolidated net income for 2018?
2. How is 2018 consolidated net income distributed to the controlling and noncontrolling interests?

Answer 1

ON 1 JANUARY 2016 BOULDER INC ACQUIRED 90% OF ROCK CORPORATION.

ANNUAL AMORTIZATION FAIR VALUE - $22,600

ON JAN 1 2017 ROCK ACQUIRED 75% OF STONE COMPANY

EXCESS AMORTIZATION ON THE SECOND ACQUISITION AMOUNTED TO $9000.

a) CONSOLIDATED NET INCOME FOR THE YEAR 2018 IS CALCULATED AS -

PARTICULAR	AMOUNT
COMPANY B'S OPERATING INCOME	$275,000
COMPANY R'S OPERATING INCOME	$95,500
COMPANY S'S OPERATING INCOME	$160,000
AMORTIZATION EXPENSES -B ACQUIRING R	($22600)
AMORTIZATION EXPENSES- R ACQUIRING S	($9,000)
CONSOLIDATED INET INCOME	$498,900

B) DISTRIBUTION OF CONSOLIDATED NET INCOME TO THE CONTROLLING AND NON CONTROLLING INTERESTS

NON CONTROLLING INTEREST IN THE FOLLOWING MANNER-

DESCRIPTION	AMOUNT	AMOUNT
S OPERATING INCOME	$160,000
AMORTIZATION EXPENSES - R ACQUIRING S	($9000)
S - NET INCOME - ACCRUAL BASIS	$151,000
OWNERSHIP OWNED BY OUTSIDER	25%
NCI IN S INCOME (151000*25%)		$37,750
R OPERATING INCOME	$95500
AMORTIZATION EXPENSES - B ACQUIRING R	($22,600)
B - NET INCOME - ACCRUAL BASIS	$72900
OWNERSHIP OWNED BY OUTSIDER	10%
NCI IN R INCOME (72900 * 10%)		7290
TOTAL NCI - NET INCOME(37,750+7290)		$45,040

CONSOLIDATED INCOME TO CONTROLLING INTERST

PARTICULAR	AMOUNT	TOTAL AMOUNT
B'S OPERATING INCOME	$275,500
B'S SHARE OF R'S INCOME ($95500*90%)	$85950
B'S SHARE OF S'S INCOME($160,000*75%*90%)	$108000	$469,450
LESS-
B'S SHARE OF R'S EXCESS AMORTIZATION($22600*90%)	($20,340)
B'S SHARE OF S'S EXCESS AMORTIZATION($9000*75%*90%)	($6075)	($26415)
CONTROLLING INTERST +		$443,035
NON CONTROLLING INTERST - NET INCOME +		$45,040
CONSOLIDATED NET INCOME		$488,075

FEEL FREE TO ASK FOR ANY CLARIFICATION , IF REQUIRED KINDLY PROVIDE FEEDBACK BY THUMB UP. IT WOULD BE HIGHLY APPRECIATED . THANK YOU.