Summit owns a 90 percent majority voting interest in Treeline. In turn, Treeline

Question

Summit owns a 90 percent majority voting interest in Treeline. In turn, Treeline owns a 70% majority voting interest in Basecamp. In the current year, each firm reports the following income and dividends. Separate Company income figures do not include any investment or dividend income.

Treeline

In addition, in computing its income on a full accural basis, Treeline's acquisition of Basecamp necessitates excess acquisition-date fair value over book value amortization of $25,000 per year. Similarly, Summit's acquisition of Treeline requires $20,000 of excess fair-value amortizations.

Required:

Prepare an Excel spreadsheet that computes the following:

1. Treeline's income including its equity in Basecamp earnings.

2. Total entity net income for the three companies.

3. Difference between these elements:

(1) Summit's net income.

(2) Total entity net income for the three compaies less noncontrolling interest in the total entity's net income.

Separate Company Income Dividends Declared Summit $345,000 $150,000

Treeline

280,000 100,000 Basecamp 175,000 40,000

Explanation / Answer

1)treeline share of Base camp Income:
Treeline's income= 280,000
Interest in base camp earnings=70%
Base camp earnings=175,000
=0.7*175000=122,500

Treeline's imncome including its equity in basecamp earnings:
=280,000+122,500=402,500

Summet share of Treeline income:

Treeline Operating Income=280,000
Equity income from Basecamp-122,500
Total =280,00+122,500= 402,500
Interest in treeline =90%
=90%*402,500=362,250

Total Entity Netincome =362,250+345,000= 707,250

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