Peabody Company owns 90% of the outstanding capital stock of Sloane Company. Dur

Question

Peabody Company owns 90% of the outstanding capital stock of Sloane Company. During 2011 and 2012 Sloane Company sold merchandise to Peabody Company at a markup of 25% of selling price. The selling price of the merchandise sold during the two years was $20,800 and $25,000, respectively. At the end of each year, Peabody Company had in its inventory one-fourth of the goods purchased that year from Sloane Company. Sloane Company reported net income of $30,000 in 2011 and $35,000 in 2012. Required: Determine the amount of the noncontrolling interest in consolidated income to be reported for 2011 and 2012.

Explanation / Answer

particulars 2011 2012
selling price 20,800 25,000
markup 25%of selling 5,200 6,250
Goods in inventory1/4th 5,200 6,250
so amount of profit included
in 1/4th part of goods   1/4 * 5,200= $1,300 1/4 * 6,250 = $1562.5
cost of inventory to be reported
in consolidated balance sheet 5,200-1,300= $3,900 6250,- 1,562.5 = $4,687.5

Income exluding profit from the
inventory held by subsidary 30,000 -1,300 = $28,700 35,000- 1562.5 = $33,437.5

non controlling share in
consolidated income (10%) .10 * 28,700= $2,870 .10 * 33,437.5 =$3,343.75

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