Gargiulo Company, a 90% owned subsidiary of Posito Corporation, sells inventory to Posito at a 25% profit on selling price. The following data are available pertaining to intra-entity purchases. Gargiulo was acquired on January 1, 2012. Assume the equity method is used. The following data are available pertaining to Gargiulo's income and dividends.
Compute the non-controlling interest in Gargiulo's net income for 2014.
A) $9,400.
B) $9,375.
C) $9,425.
D) $9,325.
E) $8,485.

Question

Gargiulo Company, a 90% owned subsidiary of Posito Corporation, sells inventory to Posito at a 25% profit on selling price. The following data are available pertaining to intra-entity purchases. Gargiulo was acquired on January 1, 2012.  Assume the equity method is used. The following data are available pertaining to Gargiulo's income and dividends. 
Compute the non-controlling interest in Gargiulo's net income for 2014.
A) $9,400. 
B) $9,375. 
C) $9,425. 
D) $9,325. 
E) $8,485.

Quizplus · Accepted Answer

Parent's Part of Net Income 2014 ($94,000 × .10) $9,400 - Earnings Adjustment for Unrealized Gains of Sub 2014 ($3,000 × .25 × .10) $75 + (Realized Gains of Sub for 2013) $100 = $9,425

Gargiulo Company, a 90% Owned Subsidiary of Posito Corporation, Sells