Question

Gargiulo Company, a 90% owned subsidiary of Posito Corporation, sells inventory to Posito at a 25%...

Gargiulo Company, a 90% owned subsidiary of Posito Corporation, sells inventory to Posito at a 25% profit on selling price. The following data are available pertaining to intra-entity purchases. Gargiulo was acquired on January 1, 2012. Assume the equity method is used. The following data are available pertaining to Gargiulo's income and dividends.

   2012    2013    2014

Purchases by Posito    $8,000    $12,000    $15,000

Ending inventory on Posito's books    $1,200 $4,000    $3,000

Gargiulo's net income    $70,000 $85,000    $94,000

Dividends paid by Gargiulo    $10,000 $10,000    $15,000

Compute the non-controlling interest in Gargiulo's net income for 2014.

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Answer #1

Solution:

The following computation can be used to calculate the non-controlling interest the year 2014:

Non-controlling Interest in Gargiulo's net income

parent's part of income for 2018=94000*10%--------------------------------------------------9400

less:

earning for unrecognized gross profit of subsidiary for 2014

closing inventory of posito 2014=$3000

gross profit=25%=3000*25%=750

lessnon controlling intrest@10%=$750*10%=-----------------------------------------------------(75)

add:

earnings adjustmnet for recognised grosss profit of subsidiary for 2013

closing inventory of posito 2013=$4000

gross profit=25%=$4000*25%=$1000

add non controlling intrest @ 10%=1000*10%=-----------------------------------------------------100

Non-controlling Interest in Gargiulo's net income-------------------------------------------------$9425

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