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rjkz
10 days ago
9

On January 1, 2019, Jannison Inc. acquired 90% of Techron Co. by paying $477,000 cash. There is no active trading market for Tec

hron 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.
Business
1 answer:
stepan [3K]10 days ago
8 0

Response:

The answer follows below.

Clarification:

Concept of Economic Unit

                      2014 2015

Jannison Inc. 308000 364000

Techron Co. 98000 126000

Subtotal 406000 490000

Subtract: Amortization 11000 11000

Net Income Total 395000 479000

Non-Controlling Interest

= 10 % of Techron Co,

(after accounting for amortization costs)

= 10% (98000-11000) 8700

= 10% (126000-11000)  11500

Total Consolidated Income 386300 467500

(post Noncontrolling interest distribution)

According to the Economic Unit concept, both companies are viewed as a single entity, thus their incomes are aggregated to determine the overall business income

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