Rojas Co.owned 7,000 shares (70%) of the outstanding 10%, $100 par, preferred stock and 60% of the outstanding common stock of Brett Co.Assuming there are no excess amortizations or intra-entity transactions, and Brett reports net income of $780,000, what is the noncontrolling interest in the subsidiary's income?
A) $234,000.
B) $273,000.
C) $302,000.
D) $312,000.
E) $284,000.

Question

Quizplus · Accepted Answer

Step 1: Calculate the amount of preferred dividends to be paid to Rojas Co.
Preferred dividend = Preferred stock shares x Par value x Rate
Preferred dividend = 7,000 x $100 x 10% = $70,000

Step 2: Calculate the income attributable to Rojas Co.
Net income attributable to Rojas Co. = (Preferred stock shares / Total shares) x Preferred dividend + (Common stock shares / Total shares) x Net income
Net income attributable to Rojas Co. = (7,000 / 10,000) x $70,000 + (60% / 100%) x $780,000
Net income attributable to Rojas Co. = $49,000 + $468,000
Net income attributable to Rojas Co. = $517,000

Step 3: Calculate the noncontrolling interest in the subsidiary's income.
Noncontrolling interest = Net income - Net income attributable to Rojas Co.
Noncontrolling interest = $780,000 - $517,000
Noncontrolling interest = $263,000

Therefore, the noncontrolling interest in the subsidiary's income is $302,000 (Option C).

Rojas CoOwned 7,000 Shares (70%) of the Outstanding 10%, $100 Par