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17 October, 03:56

Edgar Co. acquired 60% of Stendall Co. on January 1, 2013. During 2013, Edgar made several sales of inventory to Stendall. The cost and selling price of the goods were $140,000 and $200,000, respectively. Stendall still owned one-fourth of the goods at the end of 2013. Consolidated cost of goods sold for 2013 was $2,140,000 because of a consolidating adjustment for intra-entity sales less the entire profit remaining in Stendall's ending inventory. How would non-controlling interest in net income have differed if the transfers had been for the same amount and cost, but from Stendall to Edgar

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  1. 17 October, 03:59
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    Non-controlling interest in net income decreased would have by $6,000

    Explanation:

    The computation of net income is shown below:-

    Profit on Intra-Entity Sales = Revenue - Cost of goods sold

    = $200,000 - $140,000

    = $60,000

    Profit on Intra-Entity Sales * 25% still in Ending Inventory

    = $60,000 * 25%

    = $15,000

    Adjustment to Net Income * 40% for Non-controlling Interest

    = $200,000 * 25% * 30% * 40%

    = $6,000

    Net profits will go decline by $6,000
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