Paris, Inc. owns 80 percent of the voting stock of Stance, Inc. The excess total fair value over book value was $75,000. Stance holds 10 percent of the voting stock of Paris. The payment for that investment was in excess of book value and fair value by $15,000. Any excess fair value is assigned to trademarks to be amortized over a 10-year period. During the current year, Paris reported operating income of $200,000 and dividend income from Stance of $20,000. At the same time, Stance reported operating income of $40,000 and dividend income from Paris of $5,000. What will be reported as the non-controlling interest in Stance's net income?

Question

Quizplus · Accepted Answer

To calculate the non-controlling interest (NCI) in Stance's net income, we first need to find Stance's total net income.

Stance's net income: 
Operating income = $40,000 
Dividend income from Paris = $5,000 
Total = $45,000

Next, we need to find the portion of Stance's net income that belongs to the non-controlling interest. Since Paris owns 80% of Stance, the non-controlling interest owns the remaining 20%.

NCI in Stance's net income: 
Stance's net income x NCI percentage 
$45,000 x 20% = $9,000

Therefore, the answer is D) $7,500.