Gordon Co. reported current earnings of $580,000 while paying $58,000 in cash dividends. Lane Co. earned $150,000 in net income and distributed $15,000 in dividends. Gordon held a 75% interest in Lane for several years, an investment that it originally acquired by transferring consideration equal to the book value of the underlying net assets. Gordon used the initial value method to account for these shares.On January 1, 2021, Lane acquired in the open market $75,000 of Gordon's 8% bonds. The bonds had originally been issued several years ago at a price that would yield a 10% effective interest rate. On the date of the bond purchase, the book value of the bonds payable was $68,200. Lane paid $66,000 based on a 12% effective interest rate over the remaining life of the bonds.What is the noncontrolling interest's share of the subsidiary's net income?
A) $33,750.
B) $35,250.
C) $36,950.
D) $37,500.
E) $39,750.

Question

Quizplus · Accepted Answer

The noncontrolling interest's share of the subsidiary's net income is calculated as 25% of Lane Co.'s net income, which is $150,000. Therefore, 25% of $150,000 is $37,500.

Gordon Co Reported Current Earnings of $580,000 While Paying $58,000 in in Cash