### Consolidated Net Income Calculation: Noncontrolling Interest Share**Scenario:**S Corporation, an 80%-owned subsidiary of P Corporation, sold inventory items to its parent at a $48,000 profit in 2014. P resold one-third of this inventory to outside entities. S reported net income of $200,000 for 2014. You need to determine the noncontrolling interest share of consolidated net income that will appear in the income statement for 2014.**Options:**- a. $32,000- b. $33,600- c. $40,000- d. $30,400**Explanation:**To calculate the noncontrolling interest, you need to consider both the ownership percentage and how profits or losses from the sale of inventory affect the consolidated net income. Here's a detailed breakdown:1. **Ownership Percentage:** - S Corporation is 80% owned by P Corporation, which means the noncontrolling interest is 20%.2. **Profit Calculation:** - S Corporation made a $48,000 profit from selling inventory to P Corporation. - P Corporation resold one-third of this inventory to outside entities, which helps release part of the internal profit. - The released profit is $ \frac{1}{3} \times \$48,000 = \$16,000 $.3. **Remaining Profit:** - The remaining profit still held within the inventory is $ \$48,000 - \$16,000 = \$32,000 $.4. **Adjusted Net Income for S Corporation:** - Initial net income reported by S is $200,000. - Subtract the unrealized profit held within the inventory: $ \$200,000 - \$32,000 = \$168,000 $.5. **Noncontrolling Interest:** - Noncontrolling interest is 20% of adjusted net income. - Noncontrolling interest share = 20% of $168,000 = $ 0.20 \times 168,000 = \$33,600 $.**Answer:**- The correct option is **b. $33,600**.Make sure to review the principles of consolidated financial statements and intercompany profits to fully understand how this calculation was derived.

Non-controlling interest is a portion of ownership where shareholders have less the 50% ownership of…

S Corporation, an 80%-owned subsidiary of P Corporation, sold inventory items to its parent at a $48,000 profit in 2014. P resold one-third of this inventory to outside entities. S reported net income of $200,000 for 2014. Noncontrolling interest share of consolidated net income that will appear in the income statement for 2014 is Select one: a. $32,000 b. $33,600 c. $40,000 d. $30,400

S Corporation, an 80%-owned subsidiary of P Corporation, sold inventory items to its parent at a $48,000 profit in 2014. P resold one-third of this inventory to outside entities. S reported net income of $200,000 for 2014. Noncontrolling interest share of consolidated net income that will appear in the income statement for 2014 is Select one: a. $32,000 b. $33,600 c. $40,000 d. $30,400

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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P Corporation acquired an 80% interest in S Corporation on January 1, 2014, when the book values of S assets and liabilities were equal to their fair values. The cost of the 80% interest was equal to 80% of the book value of S net assets. During 2014, P sold merchandise that cost $70,000 to S for $86,000. On December 31, 2014, three-fourths of the merchandise acquired from P remained in S inventory. Separate incomes (investment income not included) of the two companies are as follows: P S Sales Revenue $180,000 $160,000 Cost of Goods Sold 120,000 90,000 Operating Expenses 17,000 21,000 Separate incomes $ 43,000 $ 49,000 What is P income from S for 2014? Select one: a. $33,000 b. $39,200 c. $29,600 d. $ 27,200
2- Give two examples of two financial ratios that will be affected by this technique (SPE). Explain your answer.
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P Corporation acquired an 80% interest in S Corporation on January 1, 2014, when the book values of S assets and liabilities were equal to their fair values. The cost of the 80% interest was equal to 80% of the book value of S net assets. During 2014, P sold merchandise that cost $70,000 to S for $86,000. On December 31, 2014, three-fourths of the merchandise acquired from P remained in S inventory. Separate incomes (investment income not included) of the two companies are as follows: P S Sales Revenue $180,000 $160,000 Cost of Goods Sold 120,000 90,000 Operating Expenses 17,000 21,000 Separate incomes $ 43,000 $ 49,000 The consolidated income statement for P Corporation and subsidiary for the year ended December 31, 2014 will show…
P CO owns a 90% interest in S Co, purchased at a time when the book values of S recorded assets and liabilities were equal to fair values. During 2014, p sold merchandise to S cost 40,000 for $32,000 . At December 31, 2014, 75% of this merchandise sold to third party . Separate incomes for P&S are summarized as follows: P S Sales $900,000 $200,000 Cost of sales 400,000 100,000 Gross profit 500,000 100,000 Operating expenses 200,000 80,000 Separate income $300,000 $ 20,000 What is amount of unrealized income from intercompany sales?…