Question
On January 1, 2014, Doone Corporation acquired 70 percent of the outstanding voting stock of Rockne Company for $588,000 consideration. At the acquisition date, the
On January 1, 2014, Doone Corporation acquired 70 percent of the outstanding voting stock of Rockne Company for $588,000 consideration. At the acquisition date, the fair value of the 30 percent noncontrolling interest was $252,000 and Rocknes assets and liabilities had a collective net fair value of $840,000. Doone uses the equity method in its internal records to account for its investment in Rockne. Rockne reports net income of $310,000 in 2015. Since being acquired, Rockne has regularly supplied inventory to Doone at 25 percent more than cost. Sales to Doone amounted to $370,000 in 2014 and $470,000 in 2015. Approximately 40 percent of the inventory purchased during any one year is not used until the following year. |
a. | What is the noncontrolling interests share of Rocknes 2015 income? |
b. | Prepare Doones 2015 consolidation entries required by the intra-entity inventory transfers. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) |
Markup (given as a percentage of cost)25%
Convert to gross profit rate [0.25 (1.00 + 0.25)]20%
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