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Non controlling interest David Company acquired 60 % of Mark

David Company acquired 60 percent of Mark Company for $300,000 when Mark's book value was $400,000. On that date, Mark had equipment (with a 10-year life) that was undervalued in the financial records by $60,000. Also, buildings (with a 20-year life) were undervalued by $40,000. Two years later, the following figures are reported by these two companies (stockholders' equity accounts have been omitted).

Mark
David Mark Company
company company Fair Market
Book Value Book Value value
Current assets . . . . . . . . . . . . . . . . $ 620,000 300,000 320,000
Equipment . . . . . . . . . . . . . . . . . . . 260,000 200,000 280,000
Buildings . . . . . . . . . . . . . . . . . . . . . 410,000 150,000 150,000
Liabilities . . . . . . . . . . . . . . . . . . . . . (390000) (120,000) (120,000)
Revenues . . . . . . . . . . . . . . . . . . . . (900,000) (400,000)
Expenses . . . . . . . . . . . . . . . . . . . . . 500,000 300,000
Investment income . . . . . . . . . . . . . not given

12. What is consolidated net income prior to the reduction for the noncontrolling interest's share of the subsidiary's income?
a. $455,200
b. $494,000
c. $497,000
d. $495,200

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See the attached file for complete solution. The text here may not be copied exactly as some of the symbols / tables may not print. Thanks

Answer (d) 495,200
Purchase price in excess of book ...

Solution Summary

Shows how to calculate the consolidated net income prior to the reduction for the noncontrolling interest's share of the subsidiary's income.

$2.19