Winner Corporation acquired 80 percent of the common shares and 70 percent of the preferred shares of First Corporation at underlying book value on January 1,2009.At that date,the fair value of the noncontrolling interest in First's common stock was equal to 20 percent of the book value of its common stock.First's balance sheet at the time of acquisition contained the following balances:
The preferred shares are cumulative and have a 10 percent annual dividend rate and are four years in arrears on January 1,2009.All of the $5 par value preferred shares are callable at $6 per share.During 2009,First reported net income of $100,000 and paid no dividends.

-Based on the preceding information,what will be the amount of income to be assigned to the noncontrolling interest in the 2009 consolidated income statement?

Question

Winner Corporation acquired 80 percent of the common shares and 70 percent of the preferred shares of First Corporation at underlying book value on January 1,2009.At that date,the fair value of the noncontrolling interest in First's common stock was equal to 20 percent of the book value of its common stock.First's balance sheet at the time of acquisition contained the following balances:
The preferred shares are cumulative and have a 10 percent annual dividend rate and are four years in arrears on January 1,2009.All of the $5 par value preferred shares are callable at $6 per share.During 2009,First reported net income of $100,000 and paid no dividends.
 
-Based on the preceding information,what will be the amount of income to be assigned to the noncontrolling interest in the 2009 consolidated income statement?

Quizplus · Accepted Answer

The noncontrolling interest is entitled to 10% of the consolidated net income. The consolidated net income is $210,000, so the noncontrolling interest's share is $21,000.

Winner Corporation Acquired 80 Percent of the Common Shares and 70