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13 August, 12:52

On January 1, 2019, Jannison Inc. acquired 90% of Techron Co. by paying $477,000 cash. There is no active trading market for Techron stock. Techron Co. reported a Common Stock account balance of $140,000 and Retained Earnings of $280,000 at that date. The fair value of Techron Co. was appraised at $530,000. The total annual amortization was $11,000 as a result of this transaction. The subsidiary earned $98,000 in 2019 and $126,000 in 2020 with dividend payments of $42,000 each year. Without regard for this investment, Jannison had income of $308,000 in 2019 and $364,000 in 2020. Prepare a proper presentation of consolidated net income and its allocation for 2019.

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  1. 13 August, 15:51
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    Answer is given below.

    Explanation:

    Economic Unit Concept

    2014 2015

    Jannison Inc. 308000 364000

    Techron Co. 98000 126000

    Sub Total 406000 490000

    Less : Amortization 11000 11000

    Total Net Income 395000 479000

    Non Controlling Interest

    = 10 % of Techron Co,

    (after deduction of amortization expense)

    = 10% (98000-11000) 8700

    = 10% (126000-11000) 11500

    Consolidated Net income 386300 467500

    (after Noncontrolling interest allocation)

    Under Economic unit concept both business are taken as a single business unit, and accordingly incomes of both entities are clubbed to find income of business as whole
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