Question

Sleepy Company, a 70%-owned subsidiary of Pickle Corporation, reported net income of $600,000 and paid dividends totaling $225,000 during Year 3. Year 3 amortization of differences between current fair values and carrying amounts of Sleepy's identifiable net assets at the date of the business combination was $112,500.

The noncontrolling interest in consolidated net income of Sleepy for Year 3 was :
a. $146,250.
b. $33,750.
c. $67,500.
d. $180,000.

Answer 1

Option (a) is correct.

Step-by-step explanation:

Given that,

Net income = $600,000

Difference between fair value and carrying value = $112,500

70%-owned subsidiary of Pickle Corporation.

Non-controlling interest in net income:

= [Net income - Difference between fair value and carrying value] × 0.3

= [$600,000 - $112,500] × 0.3

= $487,500 × 0.3

= $146,250