Pinata Corporation acquired an 80% interest in Smackem Inc.for $130,000 on January 1,2011,when Smackem had Capital Stock of $125,000 and Retained Earnings of $25,000.Assume the fair value and book value of Smackem's net assets were equal on January 1,2011.Pinata's separate income statement and a consolidated income statement for Pinata and Subsidiary as of December 31,2011,are shown below. Smackem's separate income statement must have reported net income of
A)$13,750.
B)$14,750.
C)$15,750.
D)$15,250.

Question

Pinata Corporation acquired an 80% interest in Smackem Inc.for $130,000 on January 1,2011,when Smackem had Capital Stock of $125,000 and Retained Earnings of $25,000.Assume the fair value and book value of Smackem's net assets were equal on January 1,2011.Pinata's separate income statement and a consolidated income statement for Pinata and Subsidiary as of December 31,2011,are shown below.  Smackem's separate income statement must have reported net income of
A)$13,750. 
B)$14,750. 
C)$15,750. 
D)$15,250.

Quizplus · Accepted Answer

C)Noncontrolling interest share $3,150 / 20% = $15,750

Pinata Corporation Acquired an 80% Interest in Smackem Inc