Question

On January 1, 2019, Jannison Inc. acquired 90% of Techron Co. by paying $477,000 cash. There is no active trading market for Techron stock. Techron Co. reported a Common Stock account balance of $140,000 and Retained Earnings of $280,000 at that date. The fair value of Techron Co. was appraised at $530,000. The total annual amortization was $11,000 as a result of this transaction. The subsidiary earned $98,000 in 2019 and $126,000 in 2020 with dividend payments of $42,000 each year. Without regard for this investment, Jannison had income of $308,000 in 2019 and $364,000 in 2020. Prepare a proper presentation of consolidated net income and its allocation for 2019.

Answer 1

Answer is given below.

Step-by-step explanation:

Economic Unit Concept

2014 2015

Jannison Inc. 308000 364000

Techron Co. 98000 126000

Sub Total 406000 490000

Less : Amortization 11000 11000

Total Net Income 395000 479000

Non Controlling Interest

= 10 % of Techron Co,

(after deduction of amortization expense)

= 10% (98000-11000) 8700

= 10% (126000-11000) 11500

Consolidated Net income 386300 467500

(after Noncontrolling interest allocation)

Under Economic unit concept both business are taken as a single business unit, and accordingly incomes of both entities are clubbed to find income of business as whole