Broom Manufacturing used cash to acquire 75 percent of the voting stock of Satellite Industries on January

Question:

Broom Manufacturing used cash to acquire 75 percent of the voting stock of Satellite Industries on January 1, 20X3, at underlying book value. At that date, the fair value of the noncontrolling interest was equal to 25 percent of Satellite's book value. Broom accounts for its investment in Satellite using the basic equity method.
Broom had no inventory on hand on January 1, 20X5. During 20X5, Broom purchased $300,000 of goods from Satellite and had $100,000 remaining on hand at the end of 20X5. Satellite normally prices its items so that their cost is 70 percent of sale price. On January 1, 20X5, Satellite held inventory that it had purchased from Broom for $50,000. Broom's cost of producing the items was $30,000. Satellite sold all of the merchandise in 20X5 and made no inventory purchases from Broom during 20X5.
On July 15, 20X5, Satellite sold land that it had purchased for $240,000 to Broom for $360,000. The companies file separate tax returns and have a 40 percent income tax rate. Broom does not record tax expense on its portion of Satellite's undistributed earnings. Tax expense recorded by Broom in 20X5 with regard to its investment in Satellite is based on dividends received from Satellite in 20X5. In computing taxable income, 80 percent of intercorporate payments are exempt from tax. Satellite reported net income of $190,000 for 20X5 and net assets of $900,000 on December 31, 20X5. Broom's reported income before investment income from Satellite and income tax expense of $700,000 for 20X5. Satellite and Broom paid dividends of $150,000 and $400,000, respectively, in 20X5.

Required
a. Give the journal entries recorded on Broom's books during 20X5 to reflect its ownership of Satellite.
b. Compute the income assigned to the noncontrolling interests in the 20X5 .
c. Compute consolidated net income and income to the controlling interest for 20X5.
d. Compute the amount assigned to the noncontrolling interest in the consolidated prepared as of December 31, 20X5.

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