Question

Controlling Interest in Income
On January 1, 2014, Sherwood Company, an 80% owned subsidiary of Paradise Company, sold to Paradise
Company equipment with a book value of $600,000 for $840,000. The equipment had an estimated remaining
useful life of eight years on the date of the intercompany sale.
Paradise Company reported net income from its independent operations of $550,000, and Sherwood
Company reported net income of $300,000 in the years of 2014 and 2015.
Required:
Calculate the controlling interest in combined net income for the years ended December 31, 2014, and
December 31, 2015.

Answer 1

Particulars	$2,014	$2,015
Independent income of paradise	$550,000	$550,000
Less : Depreciation	$30,000	$30,000
Independent income of paradise	$520,000	$520,000
Income of Sherwood	$300,000	$300,000
Less Profit on Sale of Equipments	$240,000	-
Income	$60,000	$300,000
Less Minority Shareholding@80%	$48,000	$240,000
Combined Income	$568,000	$760,000

Minority Shareholding is the percentage of shareholding hold by entity other than holding company.

Workings
Book Value of Equipment Sold	$600,000
Sold Value of Equipments	$840,000
Profit on Sale of Equipments	$240,000
Useful Life of Assets	8 years
Depreciation on assets
On Book Value	$75,000	=600000/8
On Sold Value of Equipments	$105,000	=840000/8
Difference is Depreciation	$30,000	=105000-75000