Question

Anderson Company, a 90% owned subsidiary of Philbin Corporation, transfers inventory to Philbin at a 30% gross profit rate. The following data are available pertaining specifically to Philbin’s intra-entity purchases from Anderson. Anderson was acquired on January 1, 2020. 2020 2021 2022 Purchases by Philbin $ 8,000 $ 12,000 $ 15,000 Ending inventory on Philbin’s books 3,000 7,000 3,000 Assume the equity method is used. The following data are available pertaining to Anderson’s income and dividends. 2020 2021 2022 Anderson’s net income $ 70,000 $ 80,000 $ 94,000 Dividends paid by Anderson 10,000 10,000 15,000 Assuming there are no excess amortizations associated with the consolidation, and no other intra-entity asset transfers, compute the net income attributable to the noncontrolling interest of Anderson for 2021.

Answer 1

ANSWER

Parent's part of Net Income = 80,000 x 10% = 8,000

Earnings adjustments for Unrecognized gross profit of subsidiary for 2021 = 7,000 x 0.30 x 10 = 210

Recognized gross profit of Subsidiary for 2020 = 3000 x 0.30 x 10 = 90

Net income attributable to the noncontrolling interest = 8,000 - 210+ 90 = $7,880

Net income attributable to the noncontrolling interest =$7,880

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