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In: Accounting

Boulder, Inc., obtained 90 percent of Rock Corporation on January 1, 2016. Annual amortization of $22,000...

Boulder, Inc., obtained 90 percent of Rock Corporation on January 1, 2016. Annual amortization of $22,000 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 $8,000 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

$245,000

$120,000

Rock

?85,000

?28,000

Stone

?150,000

?42,000

What is consolidated net income for 2018?

How is consolidated net income distributed to the controlling and noncontrolling interest

Solutions

Expert Solution

a. Consolidated Net Income for 2018:
Boulder's Operating Income $       2,45,000
Add: Rock's Operating Income $           85,000
Add: Stone's Operating Income $       1,50,000
Less: Amortization Expense - Boulder's Investment in Rock $           22,000
Less: Amortization Expense - Rock's Investment in Stone $             8,000
Consolidated Net Income $       4,50,000
b. Distribution of Net Income to Controlling and Non Controlling Interest:
Boulder's Operating Income $       2,45,000
Add: Boulder's share of Rock's Operating Income ($85,000 X 90%) $           76,500
Add: Boulder's share of Stone's Operating Income ($1,50,000 X 90% X 75%) $       1,01,250
Less: Boulder's share of Rock's Excess Amortisation ($22,000 X 90%) $           19,800
Less: Boulder's share of Stone's Excess Amortisation ($8,000 X 90% X 75%) $             5,400
Controlling Interest in Consolidated Net Income $       3,97,550
Net Income Attributable to Noncontrolling Interest (Working Note) $           52,450
Consolidated Net Income $       4,50,000
Working Note:
Net Income Attributable to Noncontrolling Interest
Stone's Operating Income $ 1,50,000
Less: Amortization Expense - Rock's Investment in Stone $       8,000
Stone's Accrual Based Net Income $ 1,42,000
Outside Ownership 25%
Noncontrolling Interest in Stone's Income $           35,500
Rock's Operating Income $     85,000
Less: Amortization Expense - Boulder's Investment in Rock $     22,000
Add: Equity Accrual From Ownership of Stone ( $1,42,000 X 75%) $ 1,06,500
Rock's Accrual Based Net Income $ 1,69,500
Outside Ownership 10%
Non Controlling Interest in Rock's Income $           16,950
Total Net Income Attributable to Noncontrolling Interest $           52,450

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