Question

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?

Answer 1

Answer:

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