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17 May, 22:01

Prescott Corp. owned 90% of Bell Inc., while Bell owned 10% of the outstanding common shares of Prescott. No goodwill or other allocations were recognized in connection with either of these acquisitions. Prescott reported operating income of $266,000 for 2013 whereas Bell earned $98,000 during the same period. No investment income was included within either of these income totals. On a consolidated income statement, what is the non-controlling interest in Bell's net income?

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  1. 17 May, 22:10
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    Non-controlling interest in Bell's net income = $136,923

    Explanation:

    Given:

    Prescott Corp. owned 90% of Bell Inc.

    Bell Inc. owned 10% Prescott Corp

    Computation:

    Total income of Prescott Corp = $266,000 + 90% of Bell Inc income ... Eq1

    Total income of Bell Inc = $98,000 + 10% of Prescott Corp income ... Eq2

    From Eq1 and Eq2

    Total income of Prescott Corp = $266,000 + 90% ($98,000 + 10% of Prescott Corp income)

    Total income of Prescott Corp = $266,000 + $88,200 + 0.09 Prescott Corp income

    Total income of Prescott Corp - 0.09 Prescott Corp income = $354,200

    0.91 Prescott Corp income = $354,200

    Prescott Corp income = $389,230.769

    Prescott Corp income = $389,231

    Non-controlling interest in Bell's net income = $98,000 + 10% of Prescott Corp income

    Non-controlling interest in Bell's net income = $98,000 + 10% ($389,231)

    Non-controlling interest in Bell's net income = $98,000 + $38,923

    Non-controlling interest in Bell's net income = $136,923
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