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20 June, 23:39

Royce Co. acquired 60% of Park Co. for $420,000 on December 31, 2014 when Park's book value was $560,000. The Royce stock was not actively traded. On the date of acquisition, Park had equipment (with a ten-year life) that was undervalued in the financial records by $140,000.

What is the non-controlling interest's share of the subsidiary's net income for the year ended December 31, 2015 and what is the ending balance of the non-controlling interest in the subsidiary at December 31, 2015?

a. $56,000 and $280,000.

b. $56,000 and $224,000.

c. $50,400 and $330,400.

d. $56,000 and $336,000.

e. $50,400 and $218,400.

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  1. 21 June, 00:17
    0
    C. $50,400 and $330,400

    Explanation:

    Non - Controlling Interest is calculated as

    Book Value of Park $560,000

    Acquired of Park ($420,000)

    Undervalued Assets ($14,000) ($140,000 / 10 years)

    Net Value of Park $126,000

    NCI = $126,000 * 40%

    NCI = $50,400

    Non - Controlling Interest in subsidiary on December 31, 2015 is $330,400

    Non - Controlling Interest in the subsidiary at year end is calculated by Adding the value of undervalued assets in to Book Value of Subsidiary

    ($560,000 + $140,000) = $280,000

    This amount is then added in The Non-Controlling Interest Calculated above

    $50,400 + $280,000 = $330,400
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