Edgar Co. acquired 60% of Stendall Co. on January 1, 2011. During 2011, Edgar made several sales of inventory to Stendall. The cost and selling price of the goods were $140,000 and $200,000, respectively. Stendall still owned one-fourth of the goods at the end of 2011. Consolidated cost of goods sold for 2011 was $2,140,000 because of a consolidating adjustment for intra-entity sales less the entire profit remaining in Stendall's ending inventory. How would non-controlling interest in net income have differed if the transfers had been for the same amount and cost, but from Stendall to Edgar?

Question

Quizplus · Accepted Answer

If the transfers were from Stendall to Edgar, the unrealized profit in ending inventory would reduce Stendall's net income, thus decreasing the non-controlling interest's share of net income by $6,000 (25% of the $60,000 profit).

Edgar Co Acquired 60% of Stendall Co