Question

Pilfer Company acquired 90 percent ownership of Scrooge Corporation in 20X7, at underlying book value. On...

Pilfer Company acquired 90 percent ownership of Scrooge Corporation in 20X7, at underlying book value. On that date, the fair value of noncontrolling interest was equal to 10 percent of the book value of Scrooge Corporation. Pilfer purchased inventory from Scrooge for $90,000 on August 20, 20X8, and resold 70 percent of the inventory to unaffiliated companies on December 1, 20X8, for $100,000. Scrooge produced the inventory sold to Pilfer for $67,000. The companies had no other transactions during 20X8.

37) Based on the information given above, what amount of consolidated net income will be assigned to the controlling interest for 20X8?

A) $51,490

B) $53,100

C) $37,000

D) $20,100

Answer: A

Please explain how to get this number!

Business   Accounting   
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Homework Answers

Answer #1

In the question, it is mentioned as Consolidated income that will be assigned to the controlling interest

1. Consolidated Sales = 100,000

2. Consolidated Cost of goods sold = 67,000 x 70% = 46,900

3. Realised profit of Non Controlling Interest group

Total profit of Subsidiary = 90,000 - 67,000 = 23,000

Profit relating to Non Controlling intetest = 23,000 x 10% = 2,300

Profit realised by Non Controlling intetest = 2,300 x 70% = 1,610

4. Total Profit of Consolidated entity = 100,000 - 46,900 = 53,100

5. Profit relating to Controlling interest

= Consolidated profit - Non Controlling interest profit

= 53,000 - 1,610

= 51,490

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