Question

Norek Corp. owned 70% of the voting common stock of Thelma Co. On January 2, 2017, Thelma sold a parcel of land to Norek. The land had a book value of $32,000 and was sold to Norek for $45,000. Thelma's reported net income for 2017 was $119,000. Assuming there are no excess amortizations associated with the consolidation, and no other intra-entity asset transfers, what is net income attributable to the noncontrolling interest?

Answer 1

$ 31,800

Step-by-step explanation:

Given data:

Shares owned by the Thelma Co. = 100 % - shares owned by the Norek corp.

thus,

Shares owned by the Thelma Co. = 100 % - 70 % = 30 %

The book value of the land = $ 32,000

Selling cost of the land = $ 45,000

Net income = $ 119,000

now,

The income generated on selling of the land = selling cost - Book value

= $ 45,000 - $ 32,000 = $ 13,000

therefore, the adjusted net income for the year 2017 = $ 119,000 - $ 13,000

= $ 106,000

now, the share owned by the Thelma from the net income = 30 % of $ 106,000

= 0.3 × $ 106,000 = $ 31,800