On January 1, 2015, P Company acquired a 90% interest in S
Company. During 2016, S Company sold merchandise to P Company at
25% above cost in the amount (selling price) of $208,800. At the
end of the year, P Company had in its inventory one-third of the
amount of goods purchased from S Company.
On January 1, 2016, P Company sold equipment that had a book value
of $75,500 to S Company for $131,700. The equipment had an
estimated remaining life of four years.
S Company reported net income of $126,200, and P Company reported
net income of $312,500 from their independent operations (including
sales to affiliates) for the year ended December 31, 2016.
Calculate controlling interest in consolidated net income for the
year ended December 31, 2016.
What is the
Controlling Interest in Consolidated Net Income? |
Consolidated Net Income For Year Ended December 31,2016
P Company Income = $312500 - $13920(W.N.1) - $56200(W.N.2)
= $242380
S Company Income = $126200 + $14050(W.N.2)
= $140250
Consolidated Net Income = P Company Income +Share of S Company Income (90%)
= $242380 + 90% of $140250
= $368605
W.N.1 Calculation of Unrealized Profit on Inventory held by P purchased from S
Inventory held by P at Year End = 1/3rd of $208800
=$69600
Unrealized Profit = Inventory Held * Profit Percentage on Cost
= $69600 * 0.20
= $13920
Note : 25% profit on Selling price is equivalent to 20% profit on cost.
W.N.2 Calculation of Profit and Additional Depreciation on Asset sold by P to S
Profit on Sale of Asset = $131700 - $75500
= $ 56200
Additional Depreciation = $56200/4
= $14050
On January 1, 2015, P Company acquired a 90% interest in S Company. During 2016, S...
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