Question

Edgar Co. acquired 60% of Stendall Co. on January 1, 2013. During 2013, Edgar made several sales of inventory to Stendall. The cost and selling price of the goods were $140,000 and $200,000, respectively. Stendall still owned one-fourth of the goods at the end of 2013. Consolidated cost of goods sold for 2013 was $2,140,000 because of a consolidating adjustment for intra-entity sales less the entire profit remaining in Stendall's ending inventory. How would non-controlling interest in net income have differed if the transfers had been for the same amount and cost, but from Stendall to Edgar?

a. Non-controlling interest in net income would have decreased by $6,000.
b. Non-controlling interest in net income would have increased by $24,000.
c. Non-controlling interest in net income would have increased by $20,000.
d. Non-controlling interest in net income would have decreased by $18,000.
e. Non-controlling interest in net income would have decreased by $56,000.

Answer 1

a. Non-controlling interest in net income would have decreased by $6,000.

Step-by-step explanation:

If the Transfers have been made from Stendall to Edgar at the same amount and cost then $60,000 worth of Goods remains in the stock. Out of $60,000 stock $15000 is the profit element involved in it being 25% of total profit.

As the stock lies with Edgar , the profit element of $15000 is deducted from Stendell Co's Net income. In Stendell 40% is Non-Controling Interest so 40% of $15,000 belongs to Non Controling interest hence $6000 would have decreased in Net Income of Non controlling interest.