Norek Corp.owned 70% of the voting common stock of Thelma Co.On January 2, 2017, Thelma sold a parcel of land to Norek.The land had a book value of $32,000 and was sold to Norek for $45,000.Thelma's reported net income for 2017 was $119,000.Assuming there are no excess amortizations associated with the consolidation, and no other intra-entity asset transfers, what is net income attributable to the noncontrolling interest?
A) $35,700.
B) $31,800.
C) $39,600.
D) $22,200.
E) $26,100.

Question

Quizplus · Accepted Answer

First, we need to calculate the gain on the sale of land by Thelma to Norek. The gain would be the difference between the selling price ($45,000) and the book value ($32,000), which equals $13,000. However, since Norek owns 70% of Thelma, it would only recognize 70% of the gain, which equals $9,100 ($13,000 x 70%). 
Next, we need to calculate the net income attributable to the noncontrolling interest. This is the portion of Thelma's net income that belongs to the noncontrolling interest, which is 30%. Therefore, the net income attributable to the noncontrolling interest would be $35,700 ($119,000 x 30%). 
However, since Norek owns 70% of Thelma, it would only recognize 70% of the net income attributable to the noncontrolling interest, which equals $24,990 ($35,700 x 70%). 
Therefore, the net income attributable to the noncontrolling interest is $31,800 ($35,700 - $24,990).