Question

S Company, the 90%-owned subsidiary of P Corporation, had a net income of $60,000 and declared and paid dividends of $20,000 for the fiscal year ended March 31, 2012. Depreciation and amortization of differences between current fair values and carrying amounts of S's identifiable net assets for the year ended March 31, 2012, totaled $10,000. The amount of the working paper elimination of P Corporation and subsidiary for minority interest in net income of subsidiary for the year ended March 31, 2012, is_________.

Answer 1

The elimination of minority interest in net income of S Company, a subsidiary of P Corporation, for the year ended March 31, 2012, is $6,000. This is calculated as 10% of S Company's net income.

Step-by-step explanation:

The student has asked for the calculation of the minority interest in net income of the subsidiary for the fiscal year ended March 31, 2012. To calculate this, we consider the net income of the 90%-owned subsidiary, which amounts to $60,000, and the ownership percentage of the minority shareholders, which is 10%. Since the depreciation and amortization impact of $10,000 has already occurred and does not directly affect the net income pertaining to the minority interest, the calculation for elimination of minority interest is simply 10% of the subsidiary's net income, without adjusting for depreciation and amortization differences.

Therefore, the minority interest in net income is $60,000 * 10% = $6,000. This is the amount that should be eliminated in the working papers of the consolidated financial statements between P Corporation and its subsidiary.