Pizza Corporation acquired 75 percent of Slice Corporation’s voting common stock on January 1, 20X4, for...

Pizza Corporation acquired 75 percent of Slice Corporation’s voting common stock on January 1, 20X4, for $353,000, when the fair value of its net identifiable assets was $466,000 and the fair value of the noncontrolling interest was $113,000. Slice reported common stock outstanding of $110,000 and retained earnings of $230,000. The excess of fair value over book value of Slice’s net assets was attributed to amortizable assets with a remaining life of 10 years. On December 31, 20X4, Slice sold a building to Pizza and recorded a gain of $30,000. Income assigned to the noncontrolling shareholders in the 20X4 consolidated income statement was $17,000.

a. Compute the amount of net income Slice reported for 20X4.

b. Compute the amount reported as consolidated net income if Pizza reported operating income of $236,000 for 20X4.

c. Compute the amount of income assigned to the controlling interest in the 20X4 consolidated income statement.

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Expert Solution

Answer:

Computation of annual amortization:

Fair value of 75% Acquisition	353000
Fair value of non controlling interest	113000
Total Fair value	466000
Less: Book value (110000+230000)	340000
Differential paid by Bold	126000
Number of years in amortization period	10
Annual Amortization	12600

a) Net Income Toll reported for 20X4:

Non Controlling Interest	17000
Add: Unrealized profit on building (30000*25%)	7500
Amortization of differential (12600*25%)	3150
Income assigned to noncontrolling interest before adjustment	27650
Net Income Slice reported for 20X4 (27650/25%)	110600

b) Consolidated net income for 20X4:

Pizza Corporation operating income	236000
Slice Corporation net income	110600
Amortization of differential (126000/10 years)	-12600
Unrelized profit on building	-30000
Consolidated net income	304000

c) Income assigned to controlling interest:

Consolidted net income	304000
Less: Non controlling interest	17000
Income assigned to controlling interest:	287000

ekkarill92 answered 1 year ago

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