Denber Co. acquired 60% of the common stock of Kailey Corp. on September 1, 2010. For 2010, Kailey reported revenues of $810,000 and expenses of $630,000, all reflected evenly throughout the year. The annual amount of amortization related to this acquisition was $15,000.
-What is the amount of net income to the controlling interest for 2010?
A) $31,000.
B) $33,000.
C) $55,000.
D) $60,000.
E) $39,000.

Question

Quizplus · Accepted Answer

To calculate net income to the controlling interest, we need to first calculate the net income of Kailey Corp. for the year 2010, which is
Net Income = Revenues - Expenses - Amortization
Net Income = $810,000 - $630,000 - $15,000
Net Income = $165,000
Now, we need to take 60% of this net income to calculate the net income to the controlling interest:
Net Income to Controlling Interest = 60% x $165,000
Net Income to Controlling Interest = $99,000
However, the question asks for the amount of net income to the controlling interest for 2010, which is only for the period after September 1 when Denber Co. acquired 60% of the common stock. So, we need to prorate the net income to the controlling interest accordingly:
Net Income to Controlling Interest for 2010 = ($99,000/12) x 4
Net Income to Controlling Interest for 2010 = $33,000
Therefore, the correct answer is option B.

Denber Co Acquired 60% of the Common Stock of Kailey Corp