Question

Redfield Company reports current earnings of $412,000 while declaring $40,000 in cash dividends. Snedeker Company earns $125,000 in net income and declares $10,000 in dividends. Redfield has held a 70 percent interest in Snedeker for several years, an investment with an acquisition-date excess fair over book value attributable solely to goodwill. Redfield uses the initial value method to account for these shares.

On January 1 of the current year, Snedeker acquired in the open market $65,600 of Redfield’s 8 percent bonds. The bonds had originally been issued several years ago for 92, reflecting a 10 percent effective interest rate. On the date of purchase, the carrying amount of the bonds payable was $63,200. Snedeker paid $60,800 based on a 12 percent effective interest rate over the remaining life of the bonds.

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

• $38,220.

• $34,500.

• $35,220.

• $37,500.

Answer 1

What is the noncontrolling interest's share of consolidated net income? 30% of $125,000 subsidiary net income; the intra-entity debt effects are attributed solely to the parent company = $125,000 x 30%= $37,500.