Question

On January 1, 2020, Harrison, Inc., acquired 90 percent of Starr Company in exchange for $1,125,000...

On January 1, 2020, Harrison, Inc., acquired 90 percent of Starr Company in exchange for $1,125,000 fair-value consideration. The total fair value of Starr Company was assessed at $1,200,000. Harrison computed annual excess fair-value amortization of $8,000 based on the difference between Starr’s total fair value and its underlying book value. The subsidiary reported net income of $70,000 in 2020 and $90,000 in 2021 with dividend declarations of $30,000 each year. Apart from its investment in Starr, Harrison had net income of $220,000 in 2020 and $260,000 in 2021.

  1. What is the consolidated net income in each of these two years?

  2. What is the balance of the noncontrolling interest in Starr at December 31, 2021?

2020 2021
a. Consolidated net income
b. Noncontrolling interest balance

Homework Answers

Answer #1

Ans;

1. Consolidated Net Income=

Particulars 2020 2021
Harrison Inc 220,000 260,000
Starr Inc 70,000 90,000
Excess fair value Amortization (8,000) (8,000)
Consolidated Net Income 282,000 342,000

2. Non controlling Interest balance

Particulars Amount($)
Starr Company's fair Value 1,200,000
Fair Value of Consideration Transferred (1,125,000)
Non controlling Interest fair Value at Jan 1,2020 75,000
2020 income to NCI (70,000-8,000)*10% 6,200
2020 Dividends to NCI (30,000*10%) (3,000)
Non controlling Interest reported Value at Dec 31,2020 78,200
2021 income to NCI(90,000-8,000)*10% 8,200
2021 Dividends to NCI (30,000*10%) (3,000)
Non controlling Interest reported Value at Dec 31,2021 83,400
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