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Summer Company sells all its output at 25 percent above cost. Parade Corporation purchases all its...

Summer Company sells all its output at 25 percent above cost. Parade Corporation purchases all its inventory from Summer. Selected information on the operations of the companies over the past three years is as follows:

Summer Company Parade Corporation
Year Sales to Parade Corp. Net Income Inventory, Dec. 31 Operating Income
20X2 $ 211,000 $ 100,000 $ 73,850 $ 165,000
20X3 186,000 90,000 111,600 248,000
20X4 246,000 160,000 131,200 303,000


Parade acquired 70 percent of the ownership of Summer on January 1, 20X1, at underlying book value.

Required:
Compute consolidated net income and income assigned to the controlling interest for 20X2, 20X3, and 20X4

Solutions

Expert Solution

Answer:

20x2 20x3 20x4
Cosolidated net Income $   2,51,440 $   3,33,600 $   4,66,560
Income assigned to Controlling interest $   2,16,464 $   2,99,760 $   4,05,136
Explanation :
Cosolidated Income 20x2 20x3 20x4
Operating Income(Parade) $   165000 $   248000 $   303000
Net Income(Summer) $   100000 $      90000 $   160000
Total $   265000 $   338000 $   463000
Unrealised profit on ending/op. Inv.
$73850-(73850/125*100) $     -14770 $      14770
$111600-(111600/125*100) $     -22320 $      22320
131200-(131200/125*100) $     -26240
Cosolidated net Income $   250230 $   330450 $   459080
Cosolidated net Income $   250230 $   330450 $   459080
Less:
Income assigned to non-cont.int.
(100000-14770)*30% $      25569
(90000+14770-22320)*30% $      24735
(160000+22320-26240)*30% $      46824
Income assigned to Cont.int. $   224661 $   305715 $   412256

ekkarill92 answered 2 years ago
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