Question

Purple Corporation acquired 75 percent of Socks Corporation’s common stock on January 1, 20X8, for $435,000. At that date, Socks reported common stock outstanding of $300,000 and retained earnings of $200,000, and the fair value of the noncontrolling interest was $145,000. The book values and fair values of Socks's assets and liabilities were equal, except for other intangible assets, which had a fair value $80,000 more than book value and a 10-year remaining life. Purple and Socks reported the following data for 20X8 and 20X9

Socks Corporation Purple Corporation
Year Net Income Comprehensive income Dividends paid Operating income Dividens paid
20X8 $40,000 50,000 15,000 $120,000 $70,000
20X9 60,000 65,000 30,000 140,000 70,000
Required:
Compute consolidated comprehensive income for 20X8 and 20X9.
20X8 20X9
Consolidated comprehensive income

Answer 1

20X8 = 162,000

20X9 = $197,000

Step-by-step explanation:

The calculation of the consolidated comprehensive income for the year 2008 and 2009 is shown below:

Consolidated comprehensive income

Particulars 20X8 20X9

Purple Corporation

Operating Income $120,000 $140,000

Add: Net Income

from Socks Corporation $40,000 $60,000

Less: Amortization of differential

($80,000 ÷ 10 Years) ($8,000) (8,000)

Consolidated net income $152,000 $192,000

Add: Comprehensive income

reported by Socks Corporation $10,000 $5,000

Consolidated

comprehensive income $162,000 $197,000