Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

On January 1, 2016, Uncle Company purchased 80 percent of Nephew Company's capital stock for $548,000 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 $548,000 in cash and other assets. Nephew had a book value of $645,000 and the 20 percent noncontrolling interest fair value was $137,000 on that date. On January 1, 2015, Nephew had acquired 30 percent of Uncle for $341,500. Uncle's appropriately adjusted book value as of that date was $1,105,000.

Separate operating incomefigures (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.

YearUncle

CompanyNephew

Company2016$166,000$34,2002017178,00052,0002018192,00061,600

  1. 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?
  2. What is the net income attributable to the noncontrolling interest for 2018?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Governmental And Nonprofit Accounting Theory And Practice

Authors: Robert J Freeman, Craig D Shoulders, Gregory S Allison, Terry K Patton, Robert Smith,

9th Edition

0132552728, 9780132552721

More Books

Students also viewed these Accounting questions

Question

Be relaxed at the hips

Answered: 1 week ago