Question

Ambrose Corporation owns 75 percent of Kroop Company's common stock, acquired at underlying book value on January 1, 20X4. At the acquisition date, the book values and fair values of Kroop's assets and liabilities were equal, and the fair value of the noncontrolling interest was equal to 25 percent of the total book value of Kroop. The income statements for Ambrose and Kroop for 20X4 include the following amounts:


Ambrose uses the cost method in accounting for its ownership of Kroop. Kroop paid dividends of $12,000 in 20X4.

Required
a. What amount should Ambrose report in its income statement as income from its investment in Kroop using equity-method accounting?
b. What amount of income should be assigned to noncontrolling interest in the consolidated income statement for 20X4?
c. What amount should Ambrose report as consolidated net income for 20X4?
d. Why should Ambrose not report consolidated net income of $79,000 ($59,000 + $20,000) for20X4?


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  • CreatedMay 23, 2014
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