1On January 1, 2011 Big Company purchased 90% of Small company for $2,700,000. O
ID: 2534781 • Letter: 1
Question
1On January 1, 2011 Big Company purchased 90% of Small company for $2,700,000. On January 1, Small had the following balance sheet:
Assets:
Cash 500,000
Inventory 500,000
Equipment 2,000,000
a/d equipment 1,000,000
liabilities accounts payable 200,000
equity common stock 1,000,000
retained earnings 800,000
The equipment with a 10 year life (no salvage) has a fair market value of $1,600,000. On January 1, 2011 (just before the purchase) Big had the following balance sheet:
Cash $4,000,000
Equipment $5,000,000
a/d equipment $3,000,000
land $3,000,000
a/p 1,000,000
common stock 1,000,000
r/e 7,000,000
In 2011, Small paid a $10,000 dividend and had the following income statement:
(note there were no transactions except for divends between Big and Small)
Sales $500,000
COGS $300,000
Gross Profit $200,000
Depreciation $100,000
Net Income $50,000
Salaries Expense $50,000
REQUIRED: DETERMINE THE BALANCE IN THE NON-CONTROLLING INTEREST ACCOUNT ON 12/31/2011
Explanation / Answer
Calculation of Non Controlling Interest
Equity Common Stock 1000000
Add Retained Earnings 800000
Total Equity On 1/1/2011 1800000
Therefore Non controlling Interest on 1/1/2011 is 1800000 x 10%, which is $180000.
Add Net income for the year 2011, 50000 x 10%, which is $5000.
Less Dividend paid for the year 10000 x 10%, which is $1000.
Therefore, non controlling interest on 12/31/2011 is $184000.
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.