Question

Sonaya is a 90% owned subsidiary of Pareto Corp.   , acquired in 25X1 at price $4,500 in excess of book value, because the undervaluation of Sonaya 's inventory was sold in 20X1. The fair value of non-controlling interest on acquisition date is equal to $10,500 and Pareto Corp. intends to acquire Sonaya for 100%. On that date, Sonaya had Capital stock of $ 80,000 and retained Earning of $20,000 .Comparative financial Statements for Pareto Corp. and Sonaya for the year ended December 31,20X8 , are presented as Follows             

			Pareto	Sonaya
Sales			500,000	84,000
Dividend Income			18,000	-
Gain on land sold			-	16,000
Cost of Sales			-240,000	-40,000
Expensed			-174,000	-30,000
	Net Income		104,000	30,000
Add: Beginning retained earnings			110,000	40,000
Deduct: Dividends			-70,000	-20,000
Retained Earning, December 31,20X8			144,000	50,000
Statement of Financial Position @Dec,31,20x8
Cash			85,500	30,000
Acoount Receivable			40,000	20,000
Inventories			60,000	15,000
Plant Assets-net			220,000	105,000
Investment in Sonaya			94,500	-
Total Assets			500,000	170,000
Account Payable			56,000	40,000
Capital Stock			300,000	80,000
Retained earnings			144,000	50,000
Total Liab & Shareholder equities			500,000	170,000

Additional Info: During 20x6, Pareto Corp. sold land to Sonaya with a profit of $10,000. Sonaya sold such land (landform Pareto Corp.) to third Party during 20X8 with a profit of $6,000.

Required: Calculate the following items : (a) gain on Land Sold, (b) Pareto corp 's net income, © Non-controlling interest income, and (d) Non-interest in equity section)

Answer 1

Sol:

A) gain on land sold: Total gain on land sold will be equal to gain of sonaya and pareto corp taking togather as they are subsidery and holding company respectively. Hence it will $15400 ($10000 of pareto and 90% $6000 of sonaya)

B)Pareto corp 's net income: will be 104000 plus 90% of 30000 (of sonaya being a subsidiary company) totaling to 104000+90% of 30000=$131000

c)Non-controlling interest income: Non-controlling interest is 10% that comes to $3000