On January 1, 2015, Crummy Corp. sold equipment to AP Inc. for $84,000 in cash.

Question

On January 1, 2015, Crummy Corp. sold equipment to AP Inc. for $84,000 in cash. The equipment originally cost $70,000 but had a book value of only $49,000 when transferred. On that date, the equipment had a five-year remaining life. Both companies compute depreciation expense using the straight-line method.

Crummy reported $154,000 of net income in 2015 (not including any investment income) while AP reported $63,000. Assume there is no excess amortization related to the original investment.

Crummy owned 85% of AP. For 2015, what is consolidated net income to the non-controlling and controlling interests?

Explanation / Answer

Profit on sale of equipment = 84000 - 49000 = $35000

Consolidated net income to the non-controlling interest = $63000 + 15% of $35000 = $68250

Consolidated net income to the controlling interest = $154000 + 85% of $35000 = $183750

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