A partial income statement for Half Moon, Inc. is reported below.

In addition, the following disclosure was found in the notes to the financial statements.
Note 7: Projected benefit obligation ......$1,500,000
Fair value of plan assets ............1,300,000
Pension liability ...............$ 200,000
Service cost ................$ 103,400
Return on plan assets .............100,100
Net pension expense ............$ 3,300
Required
Explain each of the following.
A. What information is conveyed by the line labeled “Equity income in related company”? Describe the situation that must prevail for this line to appear on an income statement.
B. What information is conveyed by the line labeled “Non-controlling interest in net income of subsidiary”? Describe the situation that must prevail for this line to appear on an income statement. Why is this amount subtracted in this case?
C. What information is conveyed by each of the first three lines of Note 7?
D. What information is conveyed by each of the second set of three lines of Note7?

Transcribed Image Text:

Half Moon, Inc. Partial Income Statenent For Year Ending December 31, 2004 Sales revenue $3,504,600 Operating income Equity income in related company (Able Co.) Income before income taxes Provision for income taxes Income before noncontrolling interests Noncontrolling interest in net income of subsidiary (Baker Co.) Net income $587,300 40,000 $ 627,300 219,500 $ 407,800 $ 405,334