X Corporation owns 80 percent of Y Corporation's common stock and 40 percent of Z Corporation's common stock.Additionally,Y Corporation owns 35 percent of Z Corporation's common stock.The acquisitions were made at book values.The following information is available for 20X8:

-Based on the information provided,what amount of income will be assigned to the noncontrolling interest in the 20X8 consolidated income statement?

Question

X Corporation owns 80 percent of Y Corporation's common stock and 40 percent of Z Corporation's common stock.Additionally,Y Corporation owns 35 percent of Z Corporation's common stock.The acquisitions were made at book values.The following information is available for 20X8:
 
-Based on the information provided,what amount of income will be assigned to the noncontrolling interest in the 20X8 consolidated income statement?

Quizplus · Accepted Answer

To calculate the noncontrolling interest's share of consolidated net income, we first need to calculate the consolidated net income. X Corporation owns 80% of Y Corporation, so we can consolidate their financial statements by taking 100% of Y Corporation's net income and multiplying it by 80%.

Y Corporation owns 35% of Z Corporation, so we need to adjust for Z Corporation's net income as well. We will take 100% of Z Corporation's net income and multiply it by the percentage of Z Corporation that X Corporation owns (40%), plus the percentage of Z Corporation that Y Corporation owns (35% x (1 - 40%) = 21%).

Consolidated net income = 100,000 + (100,000 x 0.40) + (120,000 x 0.21) = $154,200

To calculate the noncontrolling interest's share, we need to multiply the consolidated net income by the percentage of the subsidiary that is not owned by the parent. For Y Corporation, the noncontrolling interest is 20% (100% - 80%), and for Z Corporation, the noncontrolling interest is 45% (100% - 40% - 35%).

Noncontrolling interest share of consolidated net income = (100,000 x 0.20) + (120,000 x 0.45) = $18,000

Therefore, the answer is C) $18,000.

X Corporation Owns 80 Percent of Y Corporation's Common Stock