What is the subsidiary’s income recognized by Uncle in 2018?
On January 1, 2016,
Uncle Company purchased 80 percent of Nephew Company’s capital stock for $592,000 in cash and other assets. Nephew had a book value of $714,000 and the 20 percent non controlling interest fair value was $148,000 on that date. On January 1, 2015, Nephew had acquired 30 percent of Uncle for $301,750. Uncle’s appropriately adjusted book value as of that date was $972,500.
Separate operating income figures (not including investment income) for these two companies follow. In addition, Uncle declares and pays $15,000 in dividends to shareholders each year and Nephew distributes $2,000 annually. Any excess fair-value allocations are amortized over a 10-year period.
Year UncleCompany Nephew Company
2016 $104,000 $44,800
2017 $132,000 $53,800
2018 $196,000 $60,800
- Assume that Uncle applies the equity method to account for this investment in Nephew. What is the subsidiary’s income recognized by Uncle in 2018?
- What is the net income attributable to the noncontrolling interest for 2018?
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