Question

Pilla Corporation acquired 80% ownership of Schilla Incorporated, at a time when Pilla's investment cost was...

Pilla Corporation acquired 80% ownership of Schilla Incorporated, at a time when Pilla's investment cost was equal to 80% of Schilla's book value. At the time of acquisition, the book values and fair values of Schilla's assets and liabilities were equal. Pilla uses the equity method.

During 20X4, Pilla sold goods to Schilla for $160,000 making a gross profit percentage of 40%. Half of these goods remained unsold in Schilla's inventory at the end of the year.

Income statement information for Pilla and Schilla for 20X4 were as follows:

Pila Schilla

Sales revenue 800,000 300,000

COGS 500,000 120,000

Oper. Exp. 200,000 80,000

Separate income 100,000 100,000

The 20X4 consolidated income statement showed noncontrolling interest share of:

Select one:

a. $3,200

b. $6,400

c. $8,800

d. $12,000

e. $20,000

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Answer #1

Definition :-

Non controlling Interest Share = A non-controlling interest, also known as a minority interest, is an ownership position wherein a shareholder owns less than 50% of outstanding shares and has no control over decisions. Non-controlling interests are measured at the net asset value of entities and do not account for potential voting rights.

Basically, we need to apply minority share percentage on the net income of Schilla.

*Net Income = Sales revenue - COGS - Operating Expenses

= $3,00,000 - $1,20,000 - $80,000

= $1,00,000

**Minority Share or non controlling share can be calculated as = 100% - 80% = 20%

Non controlling Interest Share = $1,00,000 * 20%

= $20,000

Therefore, the answer is option (e) i.e $20,000

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