Chapter 3, Problem 3.15E

A.

To determine

Equity Method Accounting:

The equity method of accounting is the process of creating investments in associate companies. Equity accounting is usually applied wherein the investor entity holds 20-50% of the voting stock of the associate company.

Calculation of investment amount when A’s Company invested in K’s company and uses the equity-method accounting.

B.

To determine

Non-Controlling Interest:

Non-Controlling Interest is the portion of a subsidiary corporation’s stock that is not owned by the parent company. Non-controlling Interest is also known as Minority interest.

Calculation of Non-controlling interest in the consolidated income statement for 204.

C.

To determine

Consolidated Net Income:

Consolidated Net Income is the sum of net income of Parent Company excluding any income from subsidiaries recognized in its financial statement plus net income of its subsidiaries determine after excluding unrealized gains, income from intra group transactions etc.

Calculation of consolidated Net income for 204.

D.

To determine

Treatment of dividend

Holding the Company’s share of dividends will appear with profit and loss account balance in the consolidated balance sheet and the share of such dividends belonging to minority shareholders will be added to minority interest.

The reason why A’s company did not report net income $79,000