On January 1, 2019, Uncle Company purchased 80 percent of Nephew Company's capital stock for $640,000 in cash and other assets. Nephew had a book value of $761,000, and the 20 percent noncontrolling interest fair value was $160,000 on that date. On January 1, 2021, Nephew had acquired 30 percent of Uncle for $351,250. Uncle's appropriately adjusted book value as of that date was $1,137,500.   Separate operating income figures (not including investment income) for these two companies follow. In addition, Uncle declares and pays $15,000 in dividends to shareholders each year and Nephew distributes $2,000 annually. Any excess fair-value allocations are amortized over a 10-year period.     Year Uncle Company Nephew Company 2019 $ 94,000   $ 38,000   2020   191,000     58,000   2021   193,000     67,400       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? What is the net income attributable to the noncontrolling interest for 2021?   Amount a. Subsidiary income recognized                      b. Noncontrolling interest's share of income

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question

On January 1, 2019, Uncle Company purchased 80 percent of Nephew Company's capital stock for $640,000 in cash and other assets. Nephew had a book value of $761,000, and the 20 percent noncontrolling interest fair value was $160,000 on that date. On January 1, 2021, Nephew had acquired 30 percent of Uncle for $351,250. Uncle's appropriately adjusted book value as of that date was $1,137,500.

 

Separate operating income figures (not including investment income) for these two companies follow. In addition, Uncle declares and pays $15,000 in dividends to shareholders each year and Nephew distributes $2,000 annually. Any excess fair-value allocations are amortized over a 10-year period.

 

 

Year Uncle
Company
Nephew
Company
2019 $ 94,000   $ 38,000  
2020   191,000     58,000  
2021   193,000     67,400  
 

 

  1. 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?

  2. What is the net income attributable to the noncontrolling interest for 2021?

  Amount
a. Subsidiary income recognized                     
b. Noncontrolling interest's share of income  

 

Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps with 1 images

Blurred answer
Knowledge Booster
Consolidations
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education