On January 1, 2020, Doone Corporation acquired 80 percent of the outstanding voting stock of Rockne Company
Question:
On January 1, 2020, Doone Corporation acquired 80 percent of the outstanding voting stock of Rockne Company for $592,000 consideration. At the acquisition date, the fair value of the 20 percent noncontrolling interest was $148,000, and Rockne's assets and liabilities had a collective net fair value of $740,000. Doone uses the equity method in its internal records to account for its investment in Rockne. Rockne reports net income of $260,000 in 2021. Since being acquired, Rockne has regularly supplied inventory to Doone at 25 percent more than cost. Sales to Doone amounted to $320,000 in 2020 and $420,000 in 2021. Approximately 30 percent of the inventory purchased during any one year is not used until the following year.
- What is the noncontrolling interest's share of Rockne's 2021 income?
- Prepare Doone's 2021 consolidation entries required by the intra-entity inventory transfers.
Advanced Accounting
ISBN: 9781260247824
14th Edition
Authors: Joe Ben Hoyle, Thomas Schaefer, Timothy Doupnik