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Boulder, Inc., obtained 90 percent of Rock Corporation on January 1, 2016. Annual amortization of $25,900...

Boulder, Inc., obtained 90 percent of Rock Corporation on January 1, 2016. Annual amortization of $25,900 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 $12,800 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 $391,400 $135,000
Rock 135,400 21,000
Stone 198,000 42,000

  1. What is consolidated net income for 2018?

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

Solutions

Expert Solution

Computation of consolidated net income for 2018: -

Particulars Amount (in $)
Operating Income - Boulder 3,91,400
Operating Income - Rock 1,35,400
Operating Income - Stone 1,98,000
Less : Amortization Expense - Boulder investment in Rock (25,900)
Less : Amortization Expense - Rock investment in Stone (12,800)
Consolidated Net Income 6,86,100

Distribution of Consolidated net income for 2018 in to controlling interest and NCI: -

Particulars Amount (in $)
Operating Income - Stone 1,98,000
Less : Amortization Expense - Rock investment in Stone (12,800)
Investment 1,85,200

Outside Ownership = 25%

NCI in Stone Investment = $46,300 [1,85,200 x 25%] - [A]

Particulars Amount (in $)
Operating Income - Rock 1,35,400
Less : Amortization Expense - Boulder investment in Rock (25,900)
Equity accrual from ownership of stone [ 1,85,200 x 75%] 1,38,900
Investment 2,48,400

Outside Ownership = 10%

NCI in Stone Investment = $24,840 [2,48,400 x 10%] - [B]

Total Net Income attributed to NCI [A+B] = 71,140

Total Net Income attributed to Controling Interest = [6,86,100 - 71,140 ]= 6,14,960

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ekkarill92 answered 1 year ago
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