Question

On January 1, 2021, Pride, Inc. acquired 80% of the outstanding voting common stock of Strong Corp. for $364,000. There is no active market for Strong’s stock. Of this payment, $28,000 was allocated to equipment (with a five-year life) that had been undervalued on Strong's books by $35,000. Any remaining excess was attributable to goodwill, which has not been impaired.

As of December 31, 2021, before preparing the consolidated worksheet, the financial statements appeared as follows:

	Pride, Inc.				Strong Corp.
Revenues	$	420,000			$	280,000
Cost of goods sold		(196,000	)			(112,000	)
Operating expenses		(28,000	)			(14,000	)
Net income	$	196,000			$	154,000
Retained earnings, 1/1/21	$	420,000			$	210,000
Net income (above)		196,000				154,000
Dividends paid		0				0
Retained earnings, 12/31/21	$	616,000			$	364,000
Cash and receivables	$	294,000			$	126,000
Inventory		210,000				154,000
Investment in Strong Corp		364,000				0
Equipment (net)		616,000				420,000
Total assets	$	1,484,000			$	700,000
Liabilities	$	588,000			$	196,000
Common stock		280,000				140,000
Retained earnings, 12/31/21 (above)		616,000				364,000
Total liabilities and stockholders’ equity	$	1,484,000			$	700,000

During 2021, Pride bought inventory for $112,000 and sold it to Strong for $140,000. Only half of the inventory purchase price had been remitted to Pride by Strong at year-end. As of December 31, 2021, 60% of these goods remained in the company's possession.

What is the consolidated total of noncontrolling interest at December 31, 2021?

Multiple Choice

• $97,440.

• $93,800.

• $120,400.

• $117,040.

Answer 1

Total price as computed by Pride (364,000/80%)	455,000
Net income	154,000
Less: adjustment for undervaluation of asset (35000-28000)	(7000)
Amount for non-controlling interest	602,000
Proportion of non-controlling interest	20%
consolidated total ofnon-controlling interest	$ 120,400

Note that stream transaction of inventory would be only reflected in the parents books of account while consolidating separately. This won’t impact minority interest computation.