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On January 1, 2019, Uncle Company purchased 80 percent of Nephew Company's capital stock for $576,000 in cash and other assets. Nephew had a book value of $678,000, and the 20 percent noncontrolling interest fair value was $144,000 on that date. On January 1, 2021, Nephew had acquired 30 percent of Uncle for $288,250. Uncle's appropriately adjusted book value as of that date was $927,500. 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 Year Company 2019 $ 107,000 2020 156.000 Nephew Company $ 33,000 57.800

On January 1, 2019, Uncle Company purchased 80 percent of Nephew Company's capital stock for $576,000 in cash and other assets. Nephew had a book value of $678,000, and the 20 percent noncontrolling interest fair value was $144,000 on that date. On January 1, 2021, Nephew had acquired 30 percent of Uncle for $288,250. Uncle's appropriately adjusted book value as of that date was $927,500. 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 Year Company 2019 $ 107,000 2020 156.000 Nephew Company $ 33,000 57.800

FINANCIAL ACCOUNTING
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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On January 1, 2019, Uncle Company purchased 80 percent of Nephew Company's capital stock for $576,000 in cash and other assets. Nephew had a book value of $678,000, and the 20 percent noncontrolling interest fair value was $144,000 on that date. On January 1, 2021, Nephew had acquired 30 percent of Uncle for $288,250. Uncle's appropriately adjusted book value as of that date was $927,500. 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 Year Company 2019 $ 107,000 2020 2021 156,000 181,000 Nephew Company $ 33,000 57,800 60,400 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?
Transcribed Image Text:On January 1, 2019, Uncle Company purchased 80 percent of Nephew Company's capital stock for $576,000 in cash and other assets. Nephew had a book value of $678,000, and the 20 percent noncontrolling interest fair value was $144,000 on that date. On January 1, 2021, Nephew had acquired 30 percent of Uncle for $288,250. Uncle's appropriately adjusted book value as of that date was $927,500. 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 Year Company 2019 $ 107,000 2020 2021 156,000 181,000 Nephew Company $ 33,000 57,800 60,400 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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