Question

Boulder, Inc., obtained 90 percent of Rock Corporation on January 1, 2016. Annual amortization of $25,700 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 $12,600 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	$385,300	$140,000
Rock	133,300	24,000
Stone	196,000	39,000

1. What is consolidated net income for 2018?

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

Answer 1

Answer A

Details	Amount ($)
Boulder Income	$ 385,300
Rock Income	$ 133,300
Stone Income	$ 196,000
Less: Amortization Expenses Boulder's                          investment in Rock	$ 25,700
Less : Amortization expense–Rock's                  investment in Stone	$12,600
Total Consolidated net income	$ 676,300

Answer B

Details	Amount ($)
Stone Operating Income	$ 196,000
Less : Amortization expense–Rock's                  investment in Stone	$12,600
Stone's increase based net income	$ 183,400
Outstanding ownership	25%
No controlling interest in Stone's income	(183400*.25)	$ 45,850
Rock's operating income	$ 133,300
Less: Amortization expense	$ 25,700
Equity accrual from ownership of Stone ($183,400 × 75%)	$ 137,550
Rock's accrual-based net income	$ 245,150
Non controlling interest in Rock's net income (Outside ownership)	$ 245,150*10%	$ 24,515
Total net income attributable to non controlling interests		$ 70,365

Details	Amount ($)
Boulder’s operating income	$ 385,300
Boulder’s share of Rock’s operating income (90% × $133,300)	$ 119,970
Boulder’s share of Stone’s operating income (90% × 75% × $ 196,000)	$ 132,300
Less: Boulder’s share of Rock’s excess amortization (90% × $25,700)	( $ 23,130 )
Less : Boulder’s share of Stone’s excess amortization (90% × 75% × $12,600)	( $ 8, 505)
Controlling interest in consolidated net income	$ 605,935