Parrot Corporation acquired a 70% interest in Swifti Corp.on January 1,2013,when Swifti's book values and fair values were equivalent.On January 1,2014,Swifti sold a building with a book value of $60,000 to Parrot for $80,000.The building had a remaining life of five years,no salvage value,and was depreciated by the straight-line method.Swifti reported net income of $200,000 for 2014.What was the noncontrolling interest share for 2014?

Question

Quizplus · Accepted Answer

To calculate the noncontrolling interest share for 2014, we need to determine the net income attributable to the noncontrolling interest for the period.

First, we need to adjust the building sale transaction between Parrot and Swifti. Parrot paid $80,000 for a building with a book value of $60,000, resulting in a gain of $20,000 for Swifti. However, $14,000 (70% of $20,000) of this gain is attributable to the controlling interest (Parrot), and $6,000 (30% of $20,000) is attributable to the noncontrolling interest.

Next, we need to adjust Swifti's net income for the period for the portion attributable to the noncontrolling interest. The net income attributable to the controlling interest is $200,000 - $14,000 = $186,000. Therefore, the net income attributable to the noncontrolling interest is $186,000 x 0.3 = $55,800.

Thus, the noncontrolling interest share for 2014 is $55,800, which is closest to option B ($55,200).

Parrot Corporation Acquired a 70% Interest in Swifti Corp