Create an Account

Already have account?

Forgot Your Password ?

Home / Questions / On January 1 2012 Uncle Company purchased 80 percent of Nephew Company’s capital stock fo...

On January 1 2012 Uncle Company purchased 80 percent of Nephew Company’s capital stock for $500000 in cash and other assets Nephew had a book value of $600000 and the 20 percent

On January 1, 2012, Uncle Company purchased 80 percent of Nephew Company’s capital stock for $500,000 in cash and other assets. Nephew had a book value of $600,000 and the 20 percent noncontrolling interest fair value was $125,000 on that date. On January 1, 2011, Nephew had acquired 30 percent of Uncle for $280,000. Uncle’s appropriately adjusted book value as of that date was $900,000. Separate operating income figures (not including investment income) for these two companies follow. In addition, Uncle declares and pays $20,000 in dividends to shareholders each year and Nephew distributes $5,000 annually. Any excess fair-value allocations are amortized over a 10-year period.

a. Assume that Uncle applies the equity method to account for this investment in Nephew. What is the subsidiary’s income recognized by Uncle in 2014?

b. What is the noncontrolling interest’s share of 2014 consolidated net income?

Jul 21 2020 View more View Less

Answer (Solved)

question Subscribe To Get Solution

Related Questions