Paste Corporation owns 70 percent of Stick Corporation’s voting common stock. On the date of acquisition,...
Paste Corporation owns 70 percent of Stick Corporation’s voting common stock. On the date of acquisition, Stick’s fair value equaled its book value.
- On March 12, 20X2, Stick sold land it had purchased for $140,000 to Paste for $190,000. Paste plans to build a new warehouse on the property in 20X3.
- Paste has $500,000 of separate company net income for 20X2. This does not include any equity income from Stick.
- Stick has $300,000 of separate company net income.
1. What will be reported as consolidated net income on the 20X2 income statement?
2. What is 20X2 net income attributable to the noncontrolling interest?
Now assume that Paste made the sale to Stick. Assume the same separate net incomes as above.
3. What is 20X2 net income attributable to the noncontrolling interest?
Homework Answers
| Shareholding of Paste in Stick | 70% | |
| Profit on sale of land | 50000 | |
| Income of sick | 300000 | |
| Add net income sale of land | 50000 | |
| Total income | 350000 | |
| Paste's income from sick @ 75% | 262500 | |
| Minority interest | 87500 | |
| 1 | Income of Paste | 500000 |
| Add income from sick | 262500 | |
| Less: intergroup elimination(unrealised profit) | 37500 | |
| Consolidated income | 725000 | |
| 2 | net income attributable to the noncontrolling interest | 87500 |
| 3 | assume that Paste made the sale to Stick. | |
| Income of sick | 300000 | |
| Paste's income from sick @ 75% | 225000 | |
| Minority interest | 75000 | |
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