Question

Angela, Inc., holds a 90 percent interest in Corby Company. During 2020, Corby sold inventory costing $84,750 to Angela for $113,000. Of this inventory, $56,400 worth was not sold to outsiders until 2021. During 2021, Corby sold inventory costing $79,300 to Angela for $122,000. A total of $53,800 of this inventory was not sold to outsiders until 2022. In 2021, Angela reported separate net income of $239,000 while Corby's net income was $121,000 after excess amortizations. What is the noncontrolling interest in the 2021 income of the subsidiary

Answer 1

$ 11,627

Step-by-step explanation:

Calculation to determine the noncontrolling interest in the 2021 income of the subsidiary

First step is to calculate the Unrealized intra-entity gross profit, 12/31/20

UNREALIZED GROSS PROFIT, 12/31/20

Ending inventory $56,400

Gross profit rate ($28,250 ÷ $113,000) 25%

($113,000-$84,750 =$28,250)

Unrealized intra-entity gross profit, 12/31/20 $14,100

(25%*$56,400=$14,100)

Second step is to calculate Unrealized intra-entity gross profit, 12/31/21

UNREALIZED GROSS PROFIT, 12/31/21

Ending inventory $53,800

Gross profit rate ($42,700 ÷ $122,000) 35%

($122,000-$79,300=$42,700)

Unrealized intra-entity gross profit, 12/31/21 $18,830

(35%*$53,800=18,830)

Now let calculate Noncontrolling interest

NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST

Reported net income for 2021 $121,000

Add Realized gross profit deferred in 2014 $14,100

Less Deferral of 2021 unrealized gross profit (18,830)

Realized net income of subsidiary $116,270

Outside ownership 10%

(100%-90%)

Noncontrolling interest $ 11,627

(10%*$116,270)

Therefore the noncontrolling interest in the 2021 income of the subsidiary will be $ 11,627