Use the following information to answer the question(s) below.

Pahm Corporation owns 80% of the outstanding voting common stock of Abussi Corporation, which was purchased for $60,000 over Abussi's book value. The excess purchase price was attributable to goodwill. Abussi Corporation owns 60% of the outstanding common stock of Badock Corporation, which was purchased at book value. The separate net incomes of Pahm, Abussi, and Badock (excluding investment income) for the year are $200,000, $240,000, and $260,000, respectively. There were no fair value/book value differences in the assets and liabilities of Pahm, Abussi and Badock.

-The amount of income for the current year assigned to the noncontrolling shareholders of Badock Corporation is
A)$100,000.
B)$104,000.
C)$120,000.
D)$140,000.

Question

Use the following information to answer the question(s) below.

Pahm Corporation owns 80% of the outstanding voting common stock of Abussi Corporation, which was purchased for $60,000 over Abussi's book value. The excess purchase price was attributable to goodwill. Abussi Corporation owns 60% of the outstanding common stock of Badock Corporation, which was purchased at book value. The separate net incomes of Pahm, Abussi, and Badock (excluding investment income) for the year are $200,000, $240,000, and $260,000, respectively. There were no fair value/book value differences in the assets and liabilities of Pahm, Abussi and Badock.

-The amount of income for the current year assigned to the noncontrolling shareholders of Badock Corporation is
A)$100,000.
B)$104,000.
C)$120,000.
D)$140,000.

Quizplus · Accepted Answer

The noncontrolling interest in Badock Corporation's income is calculated based on the percentage of Badock that is not owned by Abussi Corporation. Since Abussi owns 60% of Badock, the noncontrolling interest owns 40%. The income assigned to the noncontrolling shareholders of Badock is 40% of Badock's net income, which is 40% of $260,000 = $104,000.

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