Tooker Co. acquired 80% of the outstanding common shares of Vu Ltd. There were no fair value increments or goodwill that arose with the purchase. During 20X1, Tooker sold $7,000 of inventory to Vu for a gross profit of 40%. At the end of 20X1, $3,000 of the inventory is still in Vu's inventory. On their separate-entity income statements for 20X1, Tooker and Vu reported net income of $4,200 and $3,100, respectively. What is the non-controlling interest's share of consolidated net income at the end of 20X1?

Question

Quizplus · Accepted Answer

The non-controlling interest's share of Vu's net income is 20% of $3,100, which is $620. The unrealized profit on the ending inventory is $3,000 * 40% = $1,200, and the non-controlling interest's share of this unrealized profit is 20% of $1,200, which is $240. Therefore, the non-controlling interest's share of consolidated net income is $620 - $240 = $380. However, the correct calculation should only consider the share of Vu's net income, which is $620.

Tooker Co Acquired 80% of the Outstanding Common Shares of Vu