On January 1, 2011, Matin Inc. (a wholly-owned subsidiary) sold equipment to Mus
ID: 2525514 • Letter: O
Question
On January 1, 2011, Matin Inc. (a wholly-owned subsidiary) sold equipment to Musial Corp. for $168,000 in cash. The equipment originally cost $140,000 but had a book value of only $98,000 when transferred. On that date, the equipment had a five-year remaining life. Depreciation expense was calculated using the straight-line method.
Musial earned $308,000 in net income in 2011 (including investment income) while Matin reported $126,000. Assume there is no amortization related to the original investment. Musial Corp. sold inventory constantly to Matin Inc. Three years intra-entity inventory transfer figures are shown in the following table. Assume that gross profit percentage is 20%.
2010
2011
2012
Purchase by Matin
80,000
120,000
150,000
Ending Inventory on Matin's Book
12,000
40,000
30,000
Prepare a schedule of consolidated net income and the share to controlling and non-controlling interests for 2011, assuming that Musial owned only 90% of Matin.
2010
2011
2012
Purchase by Matin
80,000
120,000
150,000
Ending Inventory on Matin's Book
12,000
40,000
30,000
Explanation / Answer
Martin Inc. gain on sale = 168,000-98,000=70,000
Musical corp. depreciation = 168,000/5 = 33,600
Particulars
Amount
Net Income
308,000
Add:
Gain on Sale
70,000
Total Net Income
378,000
Controlling and non-controlling interest:
Particulars
Musical
Martin
Net income
3,78,000
1,26,000
Controlling interest
3,78,000
1,13,400
Non-controlling interest
0
-12,600
Particulars
Amount
Net Income
308,000
Add:
Gain on Sale
70,000
Total Net Income
378,000
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