ProForm acquired 60 percent of ClipRite on June 30, 2017, for $1,140,000 in cash. Based on ClipRite's acquisition-date fair value, an unrecorded intangible of $400,000 was recognized and is being amortized at the rate of $15,000 per year. No goodwill was recognized in the acquisition. The noncontrolling interest fair value was assessed at $760,000 at the acquisition date. The 2018 financial statements are as follows:
ProForm | ClipRite | ||||||
Sales | $ | (900,000 | ) | $ | (800,000 | ) | |
Cost of goods sold | 585,000 | 450,000 | |||||
Operating expenses | 200,000 | 150,000 | |||||
Dividend income | (48,000 | ) | 0 | ||||
Net income | $ | (163,000 | ) | $ | (200,000 | ) | |
Retained earnings, 1/1/18 | $ | (2,300,000 | ) | $ | (950,000 | ) | |
Net income | (163,000 | ) | (200,000 | ) | |||
Dividends declared | 200,000 | 80,000 | |||||
Retained earnings, 12/31/18 | $ | (2,263,000 | ) | $ | (1,070,000 | ) | |
Cash and receivables | $ | 500,000 | $ | 400,000 | |||
Inventory | 390,000 | 800,000 | |||||
Investment in ClipRite | 1,140,000 | 0 | |||||
Fixed assets | 2,000,000 | 1,100,000 | |||||
Accumulated depreciation | (700,000 | ) | (250,000 | ) | |||
Totals | $ | 3,330,000 | $ | 2,050,000 | |||
Liabilities | $ | (667,000 | ) | $ | (580,000 | ) | |
Common stock | (400,000 | ) | (400,000 | ) | |||
Retained earnings, 12/31/18 | (2,263,000 | ) | (1,070,000 | ) | |||
Totals | $ | (3,330,000 | ) | $ | (2,050,000 | ) | |
ClipRite sold ProForm inventory costing $79,000 during the last six months of 2017 for $190,000. At year-end, 30 percent remained. ClipRite sells ProForm inventory costing $250,000 during 2018 for $350,000. At year-end, 10 percent is left. With these facts, determine the consolidated balances for the following:
|
How do you calculate the NCI in the Sub?
ANSWER
Noncontrolling interest in subsidiary, 12/31/18
40% beginning book value less intra-entity gross profit ((2050000-200000)-33300)*40%) |
726680 |
Excess intangible allocation (40% × (400000-15000)) |
154000 |
Net income attributable to noncontrolling interest |
83320 |
Dividends (40% × $80,000) |
(32000) |
Total noncontrolling interest at 12/31/18 |
$932000 |
Therefore,
Sales |
$1,350,000 |
Cost of goods sold |
$661700 |
Operating expenses |
$365,000 |
Dividend income |
$0 |
Net income attributable to noncontrolling interest |
$83320 |
Inventory |
$1180000 |
Noncontrolling interest at 12/31/18 |
$932000 |
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