Pablo Corporation acquired 60% of Abagia Corporation on January 1, 2013, at a cost of $20,000 in excess of book value. Also, on July 1, 2013, Pablo acquired 60% of Babin Corporation at book value. On January 1, 2014, Abagia acquired a 20% interest in Babin at a cost of $10,000 in excess of book value. The excess purchase costs paid by Pablo and Abagia were attributed to goodwill. On July 1, 2014, Pablo sold land with a book value of $20,000 to Abagia for $40,000. The $20,000 unrealized gain is included in Pablo's separate income. Separate net incomes for the affiliated companies (excluding investment income) for 2014 are:
Controlling interest share of consolidated net income for 2014 is

Question

Pablo Corporation acquired 60% of Abagia Corporation on January 1, 2013, at a cost of $20,000 in excess of book value. Also, on July 1, 2013, Pablo acquired 60% of Babin Corporation at book value. On January 1, 2014, Abagia acquired a 20% interest in Babin at a cost of $10,000 in excess of book value. The excess purchase costs paid by Pablo and Abagia were attributed to goodwill. On July 1, 2014, Pablo sold land with a book value of $20,000 to Abagia for $40,000. The $20,000 unrealized gain is included in Pablo's separate income. Separate net incomes for the affiliated companies (excluding investment income) for 2014 are:
 Controlling interest share of consolidated net income for 2014 is

Quizplus · Accepted Answer

To find the controlling interest share of consolidated net income, we need to prepare a consolidated income statement.

Separate net income for Pablo Corporation: $180,000 (assuming no investment income) 
Separate net income for Abagia Corporation: $120,000 (assuming no investment income) 
Separate net income for Babin Corporation: $80,000 (assuming no investment income)

Consolidated net income: 
Separate net income for Pablo Corporation                      $180,000 
Separate net income for Abagia Corporation                    $120,000 
Separate net income for Babin Corporation                       $80,000 
Add: Excess purchase cost attributed to goodwill          $30,000 
Add: Unrealized gain on land sold to Abagia                 $20,000 
Total consolidated net income                                             $430,000

Controlling interest share of consolidated net income: 
60% of consolidated net income                                             $258,000

Therefore, the choice is C.

Pablo Corporation Acquired 60% of Abagia Corporation on January 1