E 11-7 Computations under parent-company and entity theories (downstream and upstream sale)

Bhima Corporation is an 80 percent-owned subsidiary of Krishna Corporation. During 2016, Bhima sold land that cost

$50,000 to Krishna for $60,000. On at December 31, 2016, Bhima’s ending balance of inventory included $5,000 unrealized profit from intercompany transactions. Separate incomes of Krishna and Bhima for 2016 were $600,000 and

$250,000, respectively.

REQuIRED 1. Determine consolidated net income under the parent-company theory of consolidation.

2. Determine consolidated net income and its allocation to controlling and noncontrolling interest under the equity theory.