In: Accounting
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
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 |