REFERENCE: Ref.07_06
Chase Company owns 80% of Lawrence Company and 40% of Ross Company.Lawrence Company also owns 30% of Ross Company.Separate operating incomes for 2009 of Chase,Lawrence,and Ross are $450,000,$300,000,and $250,000,respectively.Each company also retains a $20,000 unrealized gain in their current income figures.Annual amortization expense of $15,000 is assigned to Chase's investment in Lawrence and another $15,000 is assigned to Lawrence's investment in Ross.
-Compute the noncontrolling interest in Ross' net income for 2009.

Question

Quizplus · Accepted Answer

The noncontrolling interest in Ross' net income is calculated by determining the portion of Ross' net income attributable to the noncontrolling interest. Ross' net income is $250,000, and the unrealized gain of $20,000 should be subtracted, resulting in $230,000. Lawrence owns 30% of Ross, and Chase owns 80% of Lawrence, so Chase indirectly owns 24% (80% of 30%) of Ross. Therefore, the noncontrolling interest in Ross is 60% (100% - 40% - 24%). The noncontrolling interest is 60% of $230,000, which equals $138,000. After subtracting the $15,000 amortization expense, the noncontrolling interest is $64,500.

REFERENCE: Ref.07_06 Chase Company Owns 80% of Lawrence Company and 40% of 40