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80% of company A's stock was purchased by company B for $500k. Book value of company...

80% of company A's stock was purchased by company B for $500k. Book value of company B is $400k. The excess was from $60k of undervalued equip and goodwill for the rest. 4 year life for equip. Income was $150k for A and $80k for B. A got $10k profit from selling inventory to B last year. It was still in the inventory at the beginning of the current year. A sold inventory for $12k profit to B this year which is till in B's inventory.

What is the consolidated income, NCI share, and controlling interest share?

Suppose B sold the inventory to A instead, how would that effect consolidated income, NCI share, and controlling interest share?

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Answer #1

Ans:If A sold the inventory to B, the profit from inventory still lying would be deducted from NCI and B's Company share respectively

A's income = $ 150k

NCI share in income is 20% of 150k = $ 30k

(-) unrealised profit of inventory 20% of ( 10k + 12k) =4.4 k

NCI SHARE =$ 25.6K

Controlling interest share = 80% of 150k = 120k

(-) unrealised profit of inventory 80% of ( 10k + 12k) = 17.6K

Controlling interest share = $102.4K

Consolidated income = 80k + 102.4k = 182.4k

If B sold the inventory to A the profit from inventory still lying would be deducted from B's income completely.

NCI share in income is 20% of 150k = $ 30k

Controlling interest share = 80% of 150k= 120k

Consolidated income = 80k + 150k - 22k = 208k

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