roblem #3 (15 points) Presented below are selected items of financial informatio
ID: 2543831 • Letter: R
Question
roblem #3 (15 points) Presented below are selected items of financial information for Dad Inc. and Kid Co. On January 1 , 2016, Dad purchased for cash 70% of the common stock of Kid. The fair value of the noncontrolling interest at the acquisition date was $84,000. Consolidated net income for 2016 was $356,000 and there was the following additional information available: Dad Co.Kid Co $95,000 $18,000 Retained earnings 1/1/2016 Net income for 2016 included in the? consolidated financial statements $220,000 Dividends paid in 2016 Compute the following balances as of December 31, 2016: 1) Consolidated net income attributable to the controlling interest $60,000 $48,000 2) Consolidated retained earnings: 3) Noncontrolling interest in the consolidated shareholders' equity section (aka, NCI balance):Explanation / Answer
Part 1:
Dad controls
70%
Non-controlling interest
30%
(100 -70)%
Net income of Kid Co. for 2016 included in the consolidated financial statements
220000
Hence, the controlling interest net income attributable to the controlling interest (70%)
(220000 X 70%)
154000
Part 2:
Consolidated retained earnings
Retained earnings of Dad Co.
95000
Add: Share of Dad Co. in Kid Co.
12600
(18000 X 70%)
Consolidated retained earnings
107600
Note: The net income of 2016 has not been considered while calculating the retained earnings balance thus, if the net income of 2016 would have been considered then the consolidated retained earnings balance would have been different.
Part 3:
Non-controlling interest
Fair value of non-controlling interest at the date of acquisition
84000
Add:
Share of retained earnings
(18000 X 30%)
5400
Share of net income (working note 1)
51600
57000
Non-controlling interest
141000
Working note 1:
Share of net income
Net income for 2016
220000
Less: Dividend paid
48000
Net income after payment of dividend
172000
Share of non-controlling interest
(172000 X 30%)
51600
Part 1:
Dad controls
70%
Non-controlling interest
30%
(100 -70)%
Net income of Kid Co. for 2016 included in the consolidated financial statements
220000
Hence, the controlling interest net income attributable to the controlling interest (70%)
(220000 X 70%)
154000
Part 2:
Consolidated retained earnings
Retained earnings of Dad Co.
95000
Add: Share of Dad Co. in Kid Co.
12600
(18000 X 70%)
Consolidated retained earnings
107600
Note: The net income of 2016 has not been considered while calculating the retained earnings balance thus, if the net income of 2016 would have been considered then the consolidated retained earnings balance would have been different.
Part 3:
Non-controlling interest
Fair value of non-controlling interest at the date of acquisition
84000
Add:
Share of retained earnings
(18000 X 30%)
5400
Share of net income (working note 1)
51600
57000
Non-controlling interest
141000
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