Question: On January 1 2011 Pearce Company purchased an 80 interest

On January 1, 2011, Pearce Company purchased an 80% interest in the capital stock of Searl Company for $2,460,000. At that time, Searl Company had capital stock of $1,500,000 and retained earnings of $300,000. The difference between book of value Searl equity and the value implied by the purchase price was attributed to specific assets of Searl Company as follows:
375,000... to equipment of Searl Company with a five-year remaining life.
187,500... to land held by Searl Company.
112,500... to inventory of Searl Company. Searl uses the FIFO assumption in pricing its inventory, and
600,000 that could not be assigned to specific assets or liabilities of Searl Company.
$1,275,000 ...Total
At year-end 2011 and 2012, Searl had in its inventory merchandise that it had purchased from Pearce at a 25% markup on cost during each year in the following amounts:
2011 ..... $ 90,000
2012 ..... $105,000
During 2011, Pearce reported net income from independent operations (including sales to affiliates) of $1,500,000, while Searle reported net income of $600,000. In 2012, Pearce’s net income from independent operations (including sales to affiliates) was $1,800,000 and Searl’s was $750,000.

Calculate the controlling interest in consolidated net income for 2011 and 2012.

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  • CreatedMarch 13, 2015
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