On January 1, 2019, Uncle Company purchased 80 percent of Nephew Company's capital stock for $500,000 in cash and other assets. Nephew had a book value of $600,000, and the 20 percent noncontrolling interest fair value was $125,000 on that date. On January 1, 2021, Nephew had acquired 30 percent of Uncle for $280,000. Uncle's appropriately adjusted book value as of that date was $900,000. Separate operating income figures (not including investment income) for these two companies follow. In addition, Uncle declares and pays $20,000 in dividends to shareholders each year and Nephew distributes $5,000 annually. Any excess fair-value allocations are amortized over a 10-year period. Uncle Company $ 90,000 120,000 140,000 Nephew Company $ 30,000 40,000 50,000 Year 2019 2020 2021 a. Assume that Uncle applies the equity method to account for this investment in Nephew. What is the subsidiary's income recognized by Uncle in 2021? b. What is the net income attributable to the noncontrolling interest for 2021?

On January 1, 2019, Uncle Company purchased 80 percent of Nephew Company's capital stock for $500,000 in cash and other assets. Nephew had a book value of $600,000, and the 20 percent noncontrolling interest fair value was $125,000 on that date. On January 1, 2021, Nephew had acquired 30 percent of Uncle for $280,000. Uncle's appropriately adjusted book value as of that date was $900,000. Separate operating income figures (not including investment income) for these two companies follow. In addition, Uncle declares and pays $20,000 in dividends to shareholders each year and Nephew distributes $5,000 annually. Any excess fair-value allocations are amortized over a 10-year period. Uncle Company $ 90,000 120,000 140,000 Nephew Company $ 30,000 40,000 50,000 Year 2019 2020 2021 a. Assume that Uncle applies the equity method to account for this investment in Nephew. What is the subsidiary's income recognized by Uncle in 2021? b. What is the net income attributable to the noncontrolling interest for 2021?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Consolidation

Consolidation in general examination implies an asset oscillating between well-defined methods of trading status. Consolidation is commonly known as market indecisiveness, which completes when the asset's values move forward or backward the trading structure.

Question

100%

On January 1, 2019, Uncle Company purchased 80 percent of Nephew Company's capital stock for $500,000 in
cash and other assets. Nephew had a book value of $600,000, and the 20 percent noncontrolling interest fair value
was $125,000 on that date. On January 1, 2021, Nephew had acquired 30 percent of Uncle for $280,000. Uncle's
appropriately adjusted book value as of that date was $900,000.
Separate operating income figures (not including investment income) for these two companies follow. In addition,
Uncle declares and pays $20,000 in dividends to shareholders each year and Nephew distributes $5,000 annually.
Any excess fair-value allocations are amortized over a 10-year period.
Uncle
Company
$ 90,000
120,000
140,000
Nephew
Company
$ 30,000
40,000
50,000
Year
2019
2020
2021
a. Assume that Uncle applies the equity method to account for this investment in Nephew. What is the subsidiary's
income recognized by Uncle in 2021?
b. What is the net income attributable to the noncontrolling interest for 2021?

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