Question

Use the following information to answer the question (8,9,10) below. Paiva Corporation owns 80% of Ackroyd Corporation's outstanding common stock and Ackroyd owns 80% of the outstanding common stock of Bailey Corporation. Bailey Corporation owns 10% of the outstanding common stock of Ackroyd Corporation. The cost of the investments was equal to book value and there were not fair value/book value differences for the investments. The separate net incomes for the three affiliated companies for the year ended December 31, 2014 (excluding investment income) are as follows: Paiva Corporation, $100,000, Ackroyd Corporation, $50,000, and Bailey Corporation, $30,000. Use the conventional approach. Symbols used: P= Income of Paiva on a consolidated basis A= Income of Ackroyd on a consolidated basis B= Income of Bailey on a consolidated basis The equation, in a set of simultaneous equations, that computes Paiva Corporation income on a consolidated basis is

P=$50,000+0.8 B.
P=$30,000+0.2 A.
P=$100,000+0.2 A.
P=$100,000+0.8 A.
Ackroyd's noncontrolling interest share for 2014 is__
o $7,609.
o $8,044.
o $15,652.
o $23,696. ​

Answer 1

The noncontrolling interest share of Ackroyd Corporation for the year 2014 is calculated by taking the net income of Bailey Corporation and Ackroyd Corporation and applying the respective noncontrolling interest percentages. The calculation results in a noncontrolling interest share of $11,200 for Ackroyd Corporation.

Step-by-step explanation:

To calculate the noncontrolling interest share (NCI) of Ackroyd Corporation for the year 2014, we need to use the net incomes provided, along with the ownership percentages between Paiva, Ackroyd, and Bailey Corporations. Ackroyd Corporation has a noncontrolling interest in Bailey Corporation. The NCI for Bailey would be the percentage of Bailey's income that is not owned by Ackroyd. Since Ackroyd owns 80% of Bailey, the noncontrolling interest would be the remaining 20%.

First, calculate the noncontrolling interest's share of Bailey Corporation's net income:

• Bailey Corporation's net income: $30,000
• Noncontrolling interest in Bailey (20%): $30,000 * 20% = $6,000

Next, calculate the noncontrolling interest's share of Ackroyd's net income, which includes the NCI of Bailey. Ackroyd itself has an 80% controlling interest, thus noncontrolling interest would be 20%.

• Ackroyd Corporation's net income excluding NCI from Bailey: $50,000
• Total income attributed to NCI of Ackroyd (including Bailey's NCI): $50,000 + $6,000 = $56,000
• Ackroyd's noncontrolling interest share (20%): $56,000 * 20% = $11,200

Therefore, the noncontrolling interest share for Ackroyd Corporation in 2014 is $11,200.