Squid Corporation, a 90%-owned subsidiary of Penguin Corporation, sold inventory items to its parent at a...
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Squid Corporation, a 90%-owned subsidiary of Penguin Corporation, sold inventory items to its parent at a $24,000 profit in 2005. Penguin resold one-third of this inventory to outside entities. Squid reported net income of $100,000 for 2005. The amount of noncontrolling interest share that will appear in the consolidated income statement for 2005 is |
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a. |
$ 8,400. |
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b. |
$ 9,200. |
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c. |
$10,000. |
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c. |
$10,800. |
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Homework Answers
a.$8,400.
Profit recognised on transactions with in the group shall be written off;
here,
out of $24,000 profit made, 1/3 rd of the goods are sold off, so adustment is to be made in respect of 2/3rd of the units
the profit related to this 2/3rd units = $24,000 *2/3 =>$16,000.
this $16,000 is to be reduced from net income of $100,000.
so the consolidated net income will be $100,000-16,000 =>$84,000.
now the non controlling interest part will be = $84,000*(1-0.90 owned by parent)=>$8,400.
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