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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 $ 205,000 $ 117,000 $ 71,750 $ 166,000
20X3 180,000 107,000 108,000 242,000
20X4 276,000 177,000 147,200 308,000


Parade acquired 60 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
Explanation :  
20x2 20x3 20x4
Cosolidated net Income $   2,68,650 $   3,41,750 $   4,77,160
Income assigned to Controlling interest $   2,27,590 $   3,01,850 $   4,09,496
Explanation :
Cosolidated Income 20x2 20x3 20x4
Operating Income(Parade) $   1,66,000 $   2,42,000 $   3,08,000
Net Income(Summer) $   1,17,000 $   1,07,000 $   1,77,000
Total $   2,83,000 $   3,49,000 $   4,85,000
Unrealised profit on ending/op. Inv.
$71750-(71750/125*100) $     -14,350 $      14,350
$108000-(108000/125*100) $     -21,600 $      21,600
147200-(147200/125*100) $     -29,440
Cosolidated net Income $   2,68,650 $   3,41,750 $   4,77,160
Cosolidated net Income $   2,68,650 $   3,41,750 $   4,77,160
Less:
Income assigned to non-cont.int.
(117000-14350)*40% $      41,060
(10700+14350-21600)*40% $      39,900
(177000+21600-29440)*40% $      67,664
Income assigned to Cont.int. $   2,27,590 $   3,01,850 $   4,09,496

ekkarill92 answered 2 years ago
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