Question

Boulder, Inc., obtained 90 percent of Rock Corporation on January 1, 2016. Annual amortization of $23,700 is applicable on the allocations of Rock's acquisition-date business fair value. On January 1, 2017, Rock acquired 75 percent of Stone Company's voting stock. Excess business fair-value amortization on this second acquisition amounted to $10,200 per year. For 2018, each of the three companies reported the following information accumulated by its separate accounting system. Separate operating income figures do not include any investment or dividend income.

1. What is consolidated net income for 2018?

2. How is 2018 consolidated net income distributed to the controlling and noncontrolling interests?

Answer 1

Consolidated net income is net income of parent, subsidiary and associates as per the accounting standards.

Controlling interest refers to domination owners while noncontrolling interest refers to minority shareholders.

Requirement 1

Boulders operating income	$               312,100
Rock's operating income	$               108,100
Stone's operating income	$               172,000
Amortization expense : Boulder's investment in Rock	$               (23,700)
Amortization expense :Rock's investment in Stone	$               (10,200)
Consolidated net income	$               558,300

Requirement 2

Stone's operating income	$               172,000
Less :Amortization expense (on Rock's investment)	$               (10,200)
Stone's accrual based net income	$               161,800
Outside ownership	25%
Noncontrolling interest in Stone's income (A)	$                 40,450
Rock's operating income	$               108,100
Amortization expense (on Boulder's investment)	$               (23,700)
Equity accrual from ownership of Stone ($161,800 × 75%)	$               121,350
Rock's accrual-based net income	$              205,750
Outside ownership	10%
Noncontrolling interest in Rock's net income (B)	$                 20,575
Total net income attributable to noncontrolling interests (A + B)	$                 61,025
Consolidated net income	$               558,300
Net income attributable to controlling interest (558300-61025)	$               497,275
Consolidated net income	$               558,300
Controlling interest in consolidated net income	$              497,275
Noncontrolling interest in consolidated net income	$               61,025