Pallet Corporation owns 90% of the outstanding common stock of Stealth Company. On January 1, 2014, Stealth Company issued $500,000, 12%, ten-year bonds.

On January 1, 2016, Pallet Corporation paid $412,000 for Stealth Company bonds with a par value of $400,000 and a carrying value of $393,600. Both companies use the straight-line method to amortize bond premiums and discounts. Pallet Corporation accounts for the investment using the cost method of accounting.

Compute the noncontrolling interest in the 2016 consolidated income assuming that Pallet Corporation reported a net income of $300,000 (includes dividend income from Stealth Company). Stealth Company reported net income of $180,000 and declared and paid cash dividends of $100,000.

a) $18,000

b) $17,440

c) $17,360

d) $18,560

Answer rating: 100% (QA)

Noncontrolling interest Net income of ... View the full answer