Assuming Investor owns 70% of Investee. What is the amount that will be recorded as Net Income for the Controlling Interest?
A) $164,000
B) $171,000
C) $178,000
D) $180,000

Question

Assuming Investor owns 70% of Investee. What is the amount that will be recorded as Net Income for the Controlling Interest?
A) $164,000 
B) $171,000 
C) $178,000 
D) $180,000

Quizplus · Accepted Answer

To calculate the net income for the controlling interest, we need to multiply the net income of the investee with the percentage of ownership of the investor.

Net income of Investee = $340,000 - $80,000 - $60,000 = $200,000

Net income for the controlling interest = Net income of Investee x Investor's percentage of ownership 
= $200,000 x 70% 
= $140,000

Net income attributed to non-controlling interest = $200,000 x 30% = $60,000

Therefore, the net income for the controlling interest will be $140,000 + investor's share of investee's equity income ($31,000) = $171,000.

Hence, B is the correct choice.

Assuming Investor Owns 70% of Investee