Question
On January 1, 2012, Uncle Company purchased 80 percent of Nephew Companys capital stock for $660,000 in cash and other assets. Nephew had a book
On January 1, 2012, Uncle Company purchased 80 percent of Nephew Companys capital stock for $660,000 in cash and other assets. Nephew had a book value of $790,000 and the 20 percent noncontrolling interest fair value was $165,000 on that date. On January 1, 2011, Nephew had acquired 30 percent of Uncle for $334,000. Uncles appropriately adjusted book value as of that date was $1,080,000. |
Separate operating income figures (not including investment income) for these two companies follow. In addition, Uncle declares and pays $30,000 in dividends to shareholders each year and Nephew distributes $4,000 annually. Any excess fair-value allocations are amortized over a 10-year period. |
Year | Uncle Company | Nephew Company | ||
2012 | $ | 101,000 | $ | 42,600 |
2013 | 180,000 | 48,600 | ||
2014 | 219,000 | 55,800 | ||
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a. | Assume that Uncle applies the equity method to account for this investment in Nephew. What is the subsidiarys income recognized by Uncle in 2014? |
Subsidiary income recognized | ????? |
b. | What is the noncontrolling interests share of 2014 consolidated net income? | ||
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