Question
On January 1, 2016, Uncle Company purchased 80 percent of Nephew Company's capital stock for $704,000 in cash and other assets. Nephew had a book
On January 1, 2016, Uncle Company purchased 80 percent of Nephew Company's capital stock for $704,000 in cash and other assets. Nephew had a book value of $844,000 and the 20 percent noncontrolling interest fair value was $176,000 on that date. On January 1, 2015, Nephew had acquired 30 percent of Uncle for $305,000. Uncle's appropriately adjusted book value as of that date was $950,000.
Separate operating incomefigures (not including investment income) for these two companies follow. In addition, Uncle declares and pays $25,000 in dividends to shareholders each year and Nephew distributes $6,000 annually. Any excess fair-value allocations are amortized over a 10-year period.
Uncle Company Nephew Company
Year 2016$84,000$41,800
2017130,00058,800
2018214,00062,600
- Assume that Uncle applies the equity method to account for this investment in Nephew. What is the subsidiary's income recognized by Uncle in 2018?
- What is the net income attributable to the noncontrolling interest for 2018?
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