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10 January, 19:50

On January 1, 20X8, Ritt Corporation acquired 80 percent of Shaw Corporation's $10 par common stock for $956,000. On this date, the fair value of the noncontrolling interest was $239,000, and the carrying amount of Shaw's net assets was $1,000,000. The fair values of Shaw's identifiable assets and liabilities were the same as their carrying amounts except for plant assets (net) with a remaining life of 20 years, which were $100,000 in excess of the carrying amount. For the year ended December 31, 20X8, Shaw had net income of $190,000 and paid cash dividends totaling $125,000. In the December 31, 20X8, consolidated balance sheet, the amount of noncontrolling interest reported should be

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  1. 10 January, 20:05
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    The amount of non-controlling interest reported should be $251,000

    Explanation:

    Non-controlling interest = $239,000

    Net income = $190,000

    Cash dividends = $125,000

    Amortization of increase in plant = $100,000 : 20 years = $5,000

    Value of Shaw's Corporation on January 1, 20X8 = $956,000 + $239,000

    = $ 1,195,000

    Value of Shaw's Corporation on December 31, 20X8 = Value of Shaw's Corporation on January 1, 20X8 + Net income - Cash dividends - Amortization of increase in plant

    = $ 1,195,000 + $190,000 - $125,000 - $5,000

    = $1,255,000

    Minority interest = 20% * $1,255,000

    = $251,000
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