Question

Redfield Company reports current earnings of $420,000 while declaring $52,000 in cash dividends. Snedeker Company earns $147,000 in net income and declares $13,000 in dividends. Redfield has held a 70 percent interest in Snedeker for several years, an investment with an acquisition-date excess fair over book value attributable solely to goodwill. Redfield uses the initial value method to account for these shares. On January 1 of the current year, Snedeker acquired in the open market $51,600 of Red- field's 8 percent bonds. The bonds had originally been issued several years ago at 92, reflecting a 10 percent effective interest rate. On the date of purchase, the carrying amount of the bonds payable was $50,400. Snedeker paid $49,200 based on a 12 percent effective interest rate over the remaining life of the bonds.

What is the noncontrolling interest's share of consolidated net income?
a. $40,200
b. $44,100
c. $40,560
d. $44,460

Answer 1

The noncontrolling interest's share of consolidated net income is $44,100, calculated as 30% of Snedeker Company's net income, since Redfield Company owns 70% of Snedeker.

Step-by-step explanation:

The noncontrolling interest's share of consolidated net income is calculated by taking the net income attributable to the noncontrolling interest, which is the portion of Snedeker Company's net income that is not owned by Redfield Company. Given that Redfield has a 70% interest in Snedeker, the noncontrolling interest would be 30%. Therefore, we calculate the noncontrolling interest's share as 30% of Snedeker's net income.

Snedeker Company's net income is $147,000. Calculating the noncontrolling interest's share: $147,000 × 30% = $44,100. Thus, the noncontrolling interest's share of consolidated net income is $44,100, which corresponds to answer choice b.