Problem

Phelps, Inc. owns 85 percent of Satellite Corporation’s voting stock. The acquisition pric...

Phelps, Inc. owns 85 percent of Satellite Corporation’s voting stock. The acquisition price exceeded book and fair value by $80,000 and was appropriately attributed to goodwill. Satellite holds 20 percent of Phelps’s voting stock. The price paid for the shares by Satellite equaled 20 percent of the parent’s book value and net fair values of its assets and liabilities.

During the current year, Phelps reported operating income of $160,000 and dividend income from Satellite of $27,000. At the same time, Satellite reported operating income of $50,000 and dividend income from Phelps of $14,000.

What is the noncontrolling interest in Satellite’s net income under the treasury stock approach?

a. $31,500.

b. $29,400.

c. $9,600.

d. $7,500.

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Solutions For Problems in Chapter 7