On January 1, 2010, Doone corporation acquired 60 percent of the outstanding voting stock of Rockne company for 300,000 consideration. At the acquisition date, the fair value of the 40 percent noncontrolling interest was 200,000 and rockne's assets and liabilities had a collective net fair value of 500,000. Doone uses the equity method in its internal records to account for its investment in Rockne. Rockne reports net income of 160,000 in 2011. Since being acquired, Rockne has regularly supplied inventory to Doone at 25% more than cost. Sales to Doone amounted to 250,000 in 2010 and 300,000 in 2011. Approximately, 30% of the inventory purchased during any one year is not used until the following year:
a.What is the noncontrolling interest share of rockne's 2011 income?
b.Prepare Doone's 2011 consolidated entries required by the intra entity inventory transfers?© BrainMass Inc. brainmass.com October 25, 2018, 2:55 am ad1c9bdddf
a. The noncontrolling interest's share of Rockne's 2011 income:
Net income reported 160,000
b. In 2010, ...
Consolidations with Non-Controlling Interest: Pell Co Demers Co Initial Value Method
Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2010. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired.
Demers earns income and pays dividends as follows:
2010 2011 2012
Net Income $100,000 $120,000 $130,000
Dividends $40,000 $50,000 $60,000
1. Assume the initial value method is applied. Compute Pell's investment in Demers at December 31, 2012.
2. Assume the partial equity method is applied. Compute Pell's investment in Demers at December 31, 2010.
3. Assume the partial equity method is applied. Compute the non-controlling interest in Demers at December 31, 2010.