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On January 1, 2019, Uncle Company purchased 80 percent of Nephew Company's capital stock for $614,400 in cash and other assets. Nephew had a book value of $719,000, and the 20 percent noncontrolling interest fair value was $153,600 on that date. On January 1, 2021, Nephew had acquired 30 percent of Uncle for $344,500. Uncle's appropriately adjusted book value as of that date was $1,115,000. Separate operating income figures (not including investment income) for these two companies follow. In addition, Uncle declares and pays $20,000 in dividends to shareholders each year and Nephew distributes $5,000 annually. Any excess fair-value allocations are amortized over a 10-year period. Uncle Nephew Company $33,800 53,000 57,800 Year Company $ 165,000 190,000 205,000 2019 2020 2021 a. Assume that Uncle applies the equity method to account for this investment in Nephew. What is the subsidiary's income recognized by Uncle in 2021? b. What is the net income attributable to the noncontrolling interest for 2021?

On January 1, 2019, Uncle Company purchased 80 percent of Nephew Company's capital stock for $614,400 in cash and other assets. Nephew had a book value of $719,000, and the 20 percent noncontrolling interest fair value was $153,600 on that date. On January 1, 2021, Nephew had acquired 30 percent of Uncle for $344,500. Uncle's appropriately adjusted book value as of that date was $1,115,000. Separate operating income figures (not including investment income) for these two companies follow. In addition, Uncle declares and pays $20,000 in dividends to shareholders each year and Nephew distributes $5,000 annually. Any excess fair-value allocations are amortized over a 10-year period. Uncle Nephew Company $33,800 53,000 57,800 Year Company $ 165,000 190,000 205,000 2019 2020 2021 a. Assume that Uncle applies the equity method to account for this investment in Nephew. What is the subsidiary's income recognized by Uncle in 2021? b. What is the net income attributable to the noncontrolling interest for 2021?

Intermediate Accounting: Reporting And Analysis
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter13: Investments And Long-term Receivables
Section: Chapter Questions
Problem 19E
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On January 1, 2019, Uncle Company purchased 80 percent of Nephew Company's capital stock for $614,400 in cash and other assets. Nephew had a book value of $719,000, and the 20 percent noncontrolling interest fair value was $153,600 on that date. On January 1, 2021, Nephew had acquired 30 percent of Uncle for $344,500. Uncle's appropriately adjusted book value as of that date was $1,115,000. Separate operating income figures (not including investment income) for these two companies follow. In addition, Uncle declares and pays $20,000 in dividends to shareholders each year and Nephew distributes $5,000 annually. Any excess fair-value allocations are amortized over a 10-year period. Nephew Company $ 33,800 53,000 57,800 Uncle Company $ 165,000 190,000 205,000 Year 2019 2020 2021 a. Assume that Uncle applies the equity method to account for this investment in Nephew. What is the subsidiary's income recognized by Uncle in 2021? b. What is the net income attributable to the noncontrolling interest for 2021?
Transcribed Image Text:On January 1, 2019, Uncle Company purchased 80 percent of Nephew Company's capital stock for $614,400 in cash and other assets. Nephew had a book value of $719,000, and the 20 percent noncontrolling interest fair value was $153,600 on that date. On January 1, 2021, Nephew had acquired 30 percent of Uncle for $344,500. Uncle's appropriately adjusted book value as of that date was $1,115,000. Separate operating income figures (not including investment income) for these two companies follow. In addition, Uncle declares and pays $20,000 in dividends to shareholders each year and Nephew distributes $5,000 annually. Any excess fair-value allocations are amortized over a 10-year period. Nephew Company $ 33,800 53,000 57,800 Uncle Company $ 165,000 190,000 205,000 Year 2019 2020 2021 a. Assume that Uncle applies the equity method to account for this investment in Nephew. What is the subsidiary's income recognized by Uncle in 2021? b. What is the net income attributable to the noncontrolling interest for 2021?
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