Question
In: Accounting
On January 1, 2017, Doone Corporation acquired 60 percent of the outstanding voting stock of Rockne...
On January 1, 2017, Doone Corporation acquired 60 percent of the outstanding voting stock of Rockne Company for $528,000 consideration. At the acquisition date, the fair value of the 40 percent noncontrolling interest was $352,000 and Rockne's assets and liabilities had a collective net fair value of $880,000. Doone uses the equity method in its internal records to account for its investment in Rockne. Rockne reports net income of $330,000 in 2018. Since being acquired, Rockne has regularly supplied inventory to Doone at 25 percent more than cost. Sales to Doone amounted to $390,000 in 2017 and $490,000 in 2018. Approximately 35 percent of the inventory purchased during any one year is not used until the following year.
- What is the noncontrolling interest's share of Rockne's 2018 income?
- Prepare Doone's 2018 consolidation entries required by the intra-entity inventory transfers.
Solutions
Expert Solution
| Part A | ||
| The Value of non controlling interest's share of Rockne's 2018 income determined as below: | ||
| Net Income of Subsidiary in 2018 | $ 330,000 | |
| Add: 2017 Intra Equity Gross Profit Realized in 2018 (390000*35%*20%) | $ 27,300 | |
| Less: 2018 Intra Equity Gross Profit deferred (490000*35%*20%) | -$ 34,300 | |
| Realized Income of Subsidiary | $ 323,000 | |
| Non Controlling Interests Share of Net Income ($323,000*40%) | $ 129,200 |
| Part B | |||
| Consolidation Journal Entries | |||
| Date | General journal | Debit | Credit |
| Journal Entry for entity G | |||
| 31-12-2018 | Retained Earnings | $ 27300 | |
| Cost Of Goods Sold | $ 273,00 | ||
| Journal Entry for TI | |||
| 31-12-2018 | Sales | $ 390,000 | |
| Cost Of Goods Sold | $ 390,000 | ||
| Journal Entry for entity G | |||
| 31-12-2018 | Cost Of Goods Sold | $ 343,00 | |
| Inventory | $ 343,00 |
| Workings: | |
| Gross Profit Margin= Markup Percentage / (1 + Markup Percentage) | |
| Mark up | 25% (Given) |
| Gross profit Margin= | 25% /(1+25%) |
| Gross profit Margin= | 20% |
ekkarill92 answered 2 years agoRelated Solutions
On January 1, 2017, Doone Corporation acquired 60 percent of the outstanding voting stock of Rockne...
On January 1, 2017, Doone Corporation acquired 60 percent of the
outstanding voting stock of Rockne Company for $600,000
consideration. At the acquisition date, the fair value of the 40
percent noncontrolling interest was $400,000 and Rockne's assets
and liabilities had a collective net fair value of $1,000,000.
Doone uses the equity method in its internal records to account for
its investment in Rockne. Rockne reports net income of $390,000 in
2018. Since being acquired, Rockne has regularly supplied inventory...
On January 1, 2017, Doone Corporation acquired 70 percent of the outstanding voting stock of Rockne...
On January 1, 2017, Doone Corporation acquired 70 percent of the
outstanding voting stock of Rockne Company for $546,000
consideration. At the acquisition date, the fair value of the 30
percent noncontrolling interest was $234,000 and Rockne's assets
and liabilities had a collective net fair value of $780,000. Doone
uses the equity method in its internal records to account for its
investment in Rockne. Rockne reports net income of $280,000 in
2018. Since being acquired, Rockne has regularly supplied inventory...
On January 1, 2017, Prestige Corporation acquired 100 percent of the voting stock of Stylene Corporation...
On January 1, 2017, Prestige Corporation acquired 100 percent of
the voting stock of Stylene Corporation in exchange for $2,227,500
in cash and securities. On the acquisition date, Stylene had the
following balance sheet:
Cash
$
31,200
Accounts payable
$
1,246,700
Accounts receivable
143,500
Inventory
182,000
Equipment (net)
1,560,000
Common stock
800,000
Trademarks
964,000
Retained earnings
834,000
$
2,880,700
$
2,880,700
At the acquisition date, the book values of Stylene’s assets and
liabilities were generally equivalent to their fair...
On January 1, 2017, Corgan Company acquired 70 percent of the outstanding voting stock of Smashing,...
On January 1, 2017, Corgan Company acquired 70 percent of the
outstanding voting stock of Smashing, Inc., for a total of
$1,155,000 in cash and other consideration. At the acquisition
date, Smashing had common stock of $840,000, retained earnings of
$390,000, and a noncontrolling interest fair value of $495,000.
Corgan attributed the excess of fair value over Smashing's book
value to various covenants with a 20-year remaining life. Corgan
uses the equity method to account for its investment in
Smashing.Net...
On January 1, 2017, Corgan Company acquired 70 percent of the outstanding voting stock of Smashing,...
On January 1, 2017, Corgan Company acquired 70 percent of the
outstanding voting stock of Smashing, Inc., for a total of
$1,015,000 in cash and other consideration. At the acquisition
date, Smashing had common stock of $800,000, retained earnings of
$350,000, and a noncontrolling interest fair value of $435,000.
Corgan attributed the excess of fair value over Smashing's book
value to various covenants with a 20-year remaining life. Corgan
uses the equity method to account for its investment in
Smashing....
On January 1, 2017, Corgan Company acquired 80 percent of the outstanding voting stock of Smashing,...
On January 1, 2017, Corgan Company acquired 80 percent of the
outstanding voting stock of Smashing, Inc., for a total of
$1,560,000 in cash and other consideration. At the acquisition
date, Smashing had common stock of $900,000, retained earnings of
$450,000, and a noncontrolling interest fair value of $390,000.
Corgan attributed the excess of fair value over Smashing's book
value to various covenants with a 20-year remaining life. Corgan
uses the equity method to account for its investment in
Smashing....
On January 1, 2017, Corgan Company acquired 80 percent of the outstanding voting stock of Smashing,...
On January 1, 2017, Corgan Company acquired 80 percent of the
outstanding voting stock of Smashing, Inc., for a total of
$1,080,000 in cash and other consideration. At the acquisition
date, Smashing had common stock of $780,000, retained earnings of
$330,000, and a noncontrolling interest fair value of $270,000.
Corgan attributed the excess of fair value over Smashing's book
value to various covenants with a 20-year remaining life. Corgan
uses the equity method to account for its investment in
Smashing....
On January 1, 2017, Corgan Company acquired 80 percent of the outstanding voting stock of Smashing,...
On January 1, 2017, Corgan Company acquired 80 percent of the
outstanding voting stock of Smashing, Inc., for a total of
$1,560,000 in cash and other consideration. At the acquisition
date, Smashing had common stock of $900,000, retained earnings of
$450,000, and a noncontrolling interest fair value of $390,000.
Corgan attributed the excess of fair value over Smashing's book
value to various covenants with a 20-year remaining life. Corgan
uses the equity method to account for its investment in
Smashing....
On January 1, 2017, Corgan Company acquired 70 percent of the outstanding voting stock of Smashing,...
On January 1, 2017, Corgan Company acquired 70 percent of the
outstanding voting stock of Smashing, Inc., for a total of $980,000
in cash and other consideration. At the acquisition date, Smashing
had common stock of $790,000, retained earnings of $340,000, and a
noncontrolling interest fair value of $420,000. Corgan attributed
the excess of fair value over Smashing's book value to various
covenants with a 20-year remaining life. Corgan uses the equity
method to account for its investment in Smashing....
On January 1, 2017, Corgan Company acquired 70 percent of the outstanding voting stock of Smashing,...
On January 1, 2017, Corgan Company acquired 70 percent of the
outstanding voting stock of Smashing, Inc., for a total of
$1,190,000 in cash and other consideration. At the acquisition
date, Smashing had common stock of $850,000, retained earnings of
$400,000, and a noncontrolling interest fair value of $510,000.
Corgan attributed the excess of fair value over Smashing's book
value to various covenants with a 20-year remaining life. Corgan
uses the equity method to account for its investment in
Smashing....
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- A neurologist needs to counsel a stroke victim and her husband about possible outcomes, treatment options,...
- Case Study: Personal Beliefs in the Workplace Don Shakow was a prominent professional who worked in...
- 1: Competency framework usage is the modern best practice in management. What is meant by competency...
- A 19.34 g mixture of sugar (C12H22O11) and table salt (NaCl) is dissolved in 231 g...
- Young and Company claims that its pressurized diving bell will, on average, maintain its integrity to...
- 1) Alternative compiled code sequence using instructions in classes A, B, C. What is the average...
- An asset is purchased on January 1 for $48,700. It is expected to have a useful...
ADVERTISEMENT