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Pinta Company acquired an 80% interest in Strummer Company on January 1, 2013, for $270,000 cash when Strummer Company had common stock of $150,000 and retained earnings of $150,000.

All excess was attributable to plant assets with a 10-year life. Strummer Company made $30,000 in 2013 and paid no dividends. Pinta Company's separate income in 2013 was $375,000.

Controlling interest in consolidated net income for 2013 is:



a. $405,000.

b. $399,000.

c. $396,000.

d. $375,000.

User Sankettt
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2 Answers

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Final answer:

The controlling interest in consolidated net income for 2013 is calculated by taking Pinta Company's income and adding 80% of Strummer Company's net income. Pinta's income is $375,000 and its 80% share of Strummer's $30,000 income is $24,000. The sum of these two amounts is $399,000, which is option (b).

Step-by-step explanation:

To calculate the controlling interest in consolidated net income for 2013, we need to first add Pinta Company's separate income to its share of Strummer Company's income. Pinta owns an 80% interest in Strummer, which made a net income of $30,000. Therefore, Pinta's share of Strummer's income is 80% of $30,000, which is $24,000. The excess payment over book value for Pinta's acquisition of Strummer was allocated to plant assets with a 10-year life. We need to amortize this excess over the 10-year period and subtract it from Pinta's share of Strummer's income. Since the total excess is not given, we cannot calculate it directly in this scenario. However, since it does not affect the calculation for Pinta's controlling interest (as it's typically a non-controlling interest adjustment), we will proceed with the next step.

Pinta's separate income for 2013 is $375,000. Therefore, the controlling interest in consolidated net income is Pinta's income plus its share of Strummer's income which is:

$375,000 (Pinta's income) + $24,000 (80% of Strummer's income) = $399,000.

Hence, the correct answer is (b) $399,000.

User Jon Colverson
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6.1k points
5 votes

Answer:

b. $399,000.

Step-by-step explanation:

Controlling interest in consolidated net income for 2013 will be 100% of parents revenue and 80% share of subsidiary's profit for the year 2013

100% of Pinta's income - 375,000

80% of Strunner's income-24,000

Total attributable to Pinta - 399,000

User MWiesner
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6.4k points