On January 1, 2019, Monica Company acquired 70 percent of Young Company’s outstanding common stock for $756,000. The fair value of the noncontrolling interest at the acquisition date was $324,000. Young reported stockholders’ equity accounts on that date as follows: Common stock—$10 par value $ 300,000 Additional paid-in capital 40,000 Retained earnings 600,000 In establishing the acquisition value, Monica appraised Young's assets and ascertained that the accounting records undervalued a building (with a five-year remaining life) by $60,000. Any remaining excess acquisition-date fair value was allocated to a franchise agreement to be amortized over 10 years. During the subsequent years, Young sold Monica inventory at a 20 percent gross profit rate. Monica consistently resold this merchandise in the year of acquisition or in the period immediately following. Transfers for the three years after this business combination was created amounted to the following: Year Transfer Price Inventory Remaining at Year-End (at transfer price) 2019 $ 70,000 $ 29,000 2020 90,000 31,000 2021 100,000 37,000 In addition, Monica sold Young several pieces of fully depreciated equipment on January 1, 2020, for $55,000. The equipment had originally cost Monica $88,000. Young plans to depreciate these assets over a five-year period. In 2021, Young earns a net income of $170,000 and declares and pays $50,000 in cash dividends. These figures increase the subsidiary's Retained Earnings to a $930,000 balance at the end of 2021. During this same year, Monica reported dividend income of $35,000 and an investment account containing the initial value balance of $756,000. No changes in Young's common stock accounts have occurred since Monica's acquisition. Compute the net income attributable to the noncontrolling interest for 2021.
On January 1, 2019, Monica Company acquired 70 percent of Young Company’s outstanding common stock for $756,000. The fair value of the noncontrolling interest at the acquisition date was $324,000.
Young reported
| Common stock—$10 par value | $ | 300,000 | |
| Additional paid-in capital | 40,000 | ||
| 600,000 | |||
In establishing the acquisition value, Monica appraised Young's assets and ascertained that the accounting records undervalued a building (with a five-year remaining life) by $60,000. Any remaining excess acquisition-date fair value was allocated to a franchise agreement to be amortized over 10 years.
During the subsequent years, Young sold Monica inventory at a 20 percent gross profit rate. Monica consistently resold this merchandise in the year of acquisition or in the period immediately following. Transfers for the three years after this business combination was created amounted to the following:
| Year | Transfer Price | Inventory Remaining at Year-End (at transfer price) |
||||
| 2019 | $ | 70,000 | $ | 29,000 | ||
| 2020 | 90,000 | 31,000 | ||||
| 2021 | 100,000 | 37,000 | ||||
In addition, Monica sold Young several pieces of fully depreciated equipment on January 1, 2020, for $55,000. The equipment had originally cost Monica $88,000. Young plans to
In 2021, Young earns a net income of $170,000 and declares and pays $50,000 in cash dividends. These figures increase the subsidiary's Retained Earnings to a $930,000 balance at the end of 2021. During this same year, Monica reported dividend income of $35,000 and an investment account containing the initial value balance of $756,000. No changes in Young's common stock accounts have occurred since Monica's acquisition.
Compute the net income attributable to the noncontrolling interest for 2021.
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