Question
Gargiulo Company, a 80% owned subsidiary of Posito Corporation, transfers inventory to Posito at a 30% gross profit rate. The following data are available pertaining
Gargiulo Company, a 80% owned subsidiary of Posito Corporation, transfers inventory to Posito at a 30% gross profit rate. The following data are available pertaining specifically to Positos intra-entity purchases from Gargiulo. Gargiulo was acquired on January 1, 2017.
|
| 2017 | 2018 | 2019 |
| Purchases by Posito | $8,000 | $12,000 | $15,000 |
| Ending inventory on Positos books | 2,400 | 3,000 | 6,000 |
Assume the equity method is used. The following data are available pertaining to Gargiulos income and dividends.
|
| 2017 | 2018 | 2019 |
| Gargiulos net income | $80,000 | $95,000 | $98,000 |
| Dividends paid by Gargiulo | 10,000 | 10,000 | 15,000 |
1. Compute the equity in earnings of Gargiulo reported on Posito's books for 2017.
2. Compute the equity in earnings of Gargiulo reported on Posito's books for 2018.
3. Compute the equity in earnings of Gargiulo reported on Posito's books for 2019.
4. Assuming there are no excess amortizations associated with the consolidation, and no other intra-entity asset transfers, compute the net income attributable to the noncontrolling interest of Gargiulo for 2017.
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