Use the following information to answer the question(s)below.
On January 1,2010,Shrimp Corporation purchased a delivery truck with an expected useful life of five years,and a salvage value of $8,000.On January 1,2012,Shrimp sold the truck to Pacet Corporation.Pacet assumed the same salvage value and remaining life of three years used by Shrimp.Straight-line depreciation is used by both companies.On January 1,2012,Shrimp recorded the following journal entry:
Pacet holds 60% of Shrimp.Shrimp reported net income of $55,000 in 2012 and Pacet's separate net income (excludes interest in Shrimp)for 2012 was $98,000.
-Assume an upstream sale of machinery occurs on January 1,2011.The parent owns 70% of the subsidiary.There is a gain on the intercompany transfer and the machine has five remaining years of useful life and no salvage value.Straight-line depreciation is used.Which of the following statements is correct?

Question

Use the following information to answer the question(s)below.
On January 1,2010,Shrimp Corporation purchased a delivery truck with an expected useful life of five years,and a salvage value of $8,000.On January 1,2012,Shrimp sold the truck to Pacet Corporation.Pacet assumed the same salvage value and remaining life of three years used by Shrimp.Straight-line depreciation is used by both companies.On January 1,2012,Shrimp recorded the following journal entry:
  Pacet holds 60% of Shrimp.Shrimp reported net income of $55,000 in 2012 and Pacet's separate net income (excludes interest in Shrimp)for 2012 was $98,000.
-Assume an upstream sale of machinery occurs on January 1,2011.The parent owns 70% of the subsidiary.There is a gain on the intercompany transfer and the machine has five remaining years of useful life and no salvage value.Straight-line depreciation is used.Which of the following statements is correct?

Quizplus · Accepted Answer

Noncontrolling interest share for 2011 is equal to: (subsidiary income for 2011 minus the gain on sale plus the excess depreciation expense) multiplied by 30%. The noncontrolling interest share is based on the subsidiary's income for the period (in this case, 2011), adjusted for any intercompany transactions, including the gain on the sale of the machinery and the excess depreciation expense resulting from the adjustment of the asset's carrying value. The noncontrolling interest percentage is then applied to this adjusted net income figure to determine the noncontrolling interest share. Choice B provides the correct formula for calculating the noncontrolling interest share in this scenario.

Use the Following Information to Answer the Question(s)below