Boulder, Inc., obtained 90 percent of Rock Corporation on January 1, 2016. Annua
ID: 2409323 • Letter: B
Question
Boulder, Inc., obtained 90 percent of Rock Corporation on January 1, 2016. Annual amortization of $22,000 is applicable on the allocations of Rock’s acquisition-date business fair value. On January 1, 2017, Rock acquired 75 percent of Stone Company’s voting stock. Excess business fair-value amortization on this second acquisition amounted to $8,000 per year. For 2018, each of the three companies reported the following information accumulated by its separate accounting system. Separate operating income figures do not include any investment or dividend income.
Separate Operating Income
Dividends Declared
Boulder
$245,000
$120,000
Rock
?85,000
?28,000
Stone
?150,000
?42,000
What is consolidated net income for 2018?
How is consolidated net income distributed to the controlling and noncontrolling interest
Separate Operating Income
Dividends Declared
Boulder
$245,000
$120,000
Rock
?85,000
?28,000
Stone
?150,000
?42,000
Explanation / Answer
a. Consolidated Net Income for 2018: Boulder's Operating Income $ 2,45,000 Add: Rock's Operating Income $ 85,000 Add: Stone's Operating Income $ 1,50,000 Less: Amortization Expense - Boulder's Investment in Rock $ 22,000 Less: Amortization Expense - Rock's Investment in Stone $ 8,000 Consolidated Net Income $ 4,50,000 b. Distribution of Net Income to Controlling and Non Controlling Interest: Boulder's Operating Income $ 2,45,000 Add: Boulder's share of Rock's Operating Income ($85,000 X 90%) $ 76,500 Add: Boulder's share of Stone's Operating Income ($1,50,000 X 90% X 75%) $ 1,01,250 Less: Boulder's share of Rock's Excess Amortisation ($22,000 X 90%) $ 19,800 Less: Boulder's share of Stone's Excess Amortisation ($8,000 X 90% X 75%) $ 5,400 Controlling Interest in Consolidated Net Income $ 3,97,550 Net Income Attributable to Noncontrolling Interest (Working Note) $ 52,450 Consolidated Net Income $ 4,50,000 Working Note: Net Income Attributable to Noncontrolling Interest Stone's Operating Income $ 1,50,000 Less: Amortization Expense - Rock's Investment in Stone $ 8,000 Stone's Accrual Based Net Income $ 1,42,000 Outside Ownership 25% Noncontrolling Interest in Stone's Income $ 35,500 Rock's Operating Income $ 85,000 Less: Amortization Expense - Boulder's Investment in Rock $ 22,000 Add: Equity Accrual From Ownership of Stone ( $1,42,000 X 75%) $ 1,06,500 Rock's Accrual Based Net Income $ 1,69,500 Outside Ownership 10% Non Controlling Interest in Rock's Income $ 16,950 Total Net Income Attributable to Noncontrolling Interest $ 52,450
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