On January 1, 2015, Choco Corp. acquired 90% of the voting common stock of Allie

Question

On January 1, 2015, Choco Corp. acquired 90% of the voting common stock of Allie Inc. During the year, Choco sold $670,000 goods to Allie which cost $560,000. Allie still owned 40% of the goods at year-end. Allie's reported net income was $600,000, and Choco's net income was $1,100,000. Choco has $70,000 excess fair value over book value and allocated the entire amount to database which has an estimated remaining life of 10 years. Choco decided to use the equity method to account for this investment. What was the non-controlling interest's share of consolidated net income?

Explanation / Answer

Deferral Income ((670000-560000)*40%*90%) = 39600

Choco’s Net Income   $1,100,000

Add: Allies net Income   $600,000

Less: Deferral Income     ($39,600)

Consolidated Income   $1,660,400

Less: Non controlling     ($60,000)

         Interest(10%)

Net Consolidated Income $1,600,400

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