Question

# Pepa Co. acquired 80% of Susu Co. for \$300,000 on January 1, 2012 when Susu’s book...

Pepa Co. acquired 80% of Susu Co. for \$300,000 on January 1, 2012 when Susu’s book value was \$280,000. The Susu stock was not actively traded. On the date of acquisition, Susu had equipment (with a 10-year life) that was undervalued in the financial records by \$95,000. One year later, the following selected figures were reported by the two companies (stockholders’ equity accounts have been omitted). Additionally, no dividends have been paid.

 Pepa Book Value Susu Book Value Current assets and investment 640,000 180,000 Buildings 150,000 120,000 Equipment 200,000 110,000 Liabilities (120,000) (30,000) Revenues (900,000) (350,000) Expenses 600,000 250,000 Investment income Not given

What is consolidated net income for 2012 attributable to noncontrolling interest?

What is the noncontroling interest's share of the susu's Net income for the the year end?

What is the ending balance of the noncontrolling interest in the susu?

#### Homework Answers

Answer #1

1. Calculation of Net income for 2012 attributable to non-controlling interest.

Net income of Susu for the year 2012 = (350,000) - 250,000 = \$600,000

Share of Non-controlling interest = 600,000 x 20% = \$(120,000)

2. Non-controlling interest share is 20%.

3. Ending Balnce of non-controlling interest

Non-controlling interest in pre acquisition value = (280,000 + 95,000) x 20% = 75,000

Income attributable to non-controlling interest = \$(120,000)

Net Balance of non-controlling interest = 75,000 - 120,000 = \$(45,000)

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