On January 1, 2014, Jannison Inc. acquired 90% of Techron Co. by paying $477,000

Question

On January 1, 2014, Jannison Inc. acquired 90% of Techron Co. by paying $477,000 cash. There is no active trading market for Techron stock. Techron Co. reported a Common Stock account balance of $140,000 and Retained Earnings of $280,000 at that date. The fair value of Techron Co. was appraised at $530,000. The total annual amortization was $11,000 as a result of this transaction. The subsidiary earned $98,000 in 2014 and $126,000 in 2015 with dividend payments of $42,000 each year. Without regard for this investment, Jannison had income of $308,000 in 2014 and $364,000 in 2015. Use the economic unit concept to account for this acquisition.

Prepare a proper presentation of consolidated net income for 2014

Explanation / Answer

Under Economic unit concept both business are taken as a single business unit, and accordingly incomes of both entities are clubbed to find income of business as whole

Economic Unit Concept 2014 2015 Jannison Inc. 308000 364000 Techron Co. 98000 126000 Sub Total 406000 490000 Less : Amortization 11000 11000 Total Net Income 395000 479000 Non Controlling Interest = 10 % of Techron Co, (after deduction of amortization expense) = 10% (98000-11000) 8700 = 10% (126000-11000) 11500 Consolidated Net income 386300 467500 (after Noncontrolling interest allocation)

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.