On December 31, 20X2, Dark Company purchased 75% of the outstanding common shares of Light Company for $6.0 million in cash. On that date, the shareholders' equity of Light totalled $6 million and consisted of $1 million in no par common shares and $5 million in retained earnings. Both companies use the straight-line method to calculate depreciation and amortization. For the year ending December 31 , 20 X 4 31,20 \mathrm { X } 4 31 , 20 X 4 , the statements of comprehensive income for Dark and Light were as follows: Dark Light Sales and other revenue $ 12 , 500 , 000 $ 6 , 804 , 000 Cost of goods sold 8 , 000 , 000 4 , 000 , 000 Depreciation expense 1 , 500 , 000 1 , 000 , 000 Other expenses 1 , 800 , 000 1 , 200 , 000 Total expenses 11 , 300 , 000 ‾ 6 , 200 , 000 Net income $ 1 , 200 , 000 ‾ $ 604 , 000 ‾ \begin{array}{lcc} & ext { Dark } & ext { Light } \ ext { Sales and other revenue } & \$ 12,500,000 & \$ 6,804,000 \ ext { Cost of goods sold } & 8,000,000 & 4,000,000 \ ext { Depreciation expense } & 1,500,000 & 1,000,000 \ ext { Other expenses } & 1,800,000 & 1,200,000 \ ext { Total expenses } & \underline{11,300,000} & 6,200,000 \ ext {Net income} & \underline{\$ 1,200,000} & \underline{\$ 604,000} \\end{array} Sales and other revenue Cost of goods sold Depreciation expense Other expenses Total expenses Net income Dark $12 , 500 , 000 8 , 000 , 000 1 , 500 , 000 1 , 800 , 000 11 , 300 , 000 $1 , 200 , 000 Light $6 , 804 , 000 4 , 000 , 000 1 , 000 , 000 1 , 200 , 000 6 , 200 , 000 $604 , 000 OTHER INFORMATION:1. On December 31, 20X2, Light had a building with a fair value that was $4,900,000 and an estimated remaining useful life of 20 years.2. On December 31, 20X2, Light had a trademark that had a fair value of $60,000. The trademark has an expected useful life of five years.3. During 20X3, Light sold merchandise to Dark for $150,000, a price that included a gross profit of $50,000. During 20X3, 40% of this merchandise was resold by Dark and the other 60% remained in its December 31, 20X3, inventories.4. On December 31, 20X4, the inventories of Dark contained merchandise purchased from Light on which Light had recognized a gross profit in the amount of $20,000. Total sales from Light to Dark were $150,000 during 20X4.5. During 20X4, Dark declared and paid dividends of $300,000 while Light declared and paid dividends of $100,000.6. Dark accounts for its investment in Light using the cost method.Required:Calculate the non-controlling interest on the consolidated statement of financial position at December 31, 20X4, under the entity method.Calculate the NCI's share of earnings for 20X4.

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On December 31, 20X2, Dark Company purchased 75% of the outstanding common shares of Light Company for $6.0 million in cash. On that date, the shareholders' equity of Light totalled $6 million and consisted of $1 million in no par common shares and $5 million in retained earnings. Both companies use the straight-line method to calculate depreciation and amortization.   For the year ending December   31 , 20 X 4 31,20 \mathrm { X } 4 31 , 20 X 4  , the statements of comprehensive income for Dark and Light were as follows:  Dark   Light   Sales and other revenue  $ 12 , 500 , 000 $ 6 , 804 , 000  Cost of goods sold  8 , 000 , 000 4 , 000 , 000  Depreciation expense  1 , 500 , 000 1 , 000 , 000  Other expenses  1 , 800 , 000 1 , 200 , 000  Total expenses  11 , 300 , 000 ‾ 6 , 200 , 000 Net income $ 1 , 200 , 000 ‾ $ 604 , 000 ‾ \begin{array}{lcc} & 	ext { Dark }  & 	ext { Light } \ 	ext { Sales and other revenue }  &  \$ 12,500,000  &  \$ 6,804,000 \ 	ext { Cost of goods sold }  &  8,000,000  &  4,000,000 \	ext { Depreciation expense }  &  1,500,000  &  1,000,000 \	ext { Other expenses }  &  1,800,000  &  1,200,000 \ 	ext { Total expenses }  &  \underline{11,300,000}  &  6,200,000 \ 	ext {Net income} &  \underline{\$ 1,200,000} &   \underline{\$ 604,000} \\end{array}  Sales and other revenue   Cost of goods sold   Depreciation expense   Other expenses   Total expenses  Net income ​  Dark  $12 , 500 , 000 8 , 000 , 000 1 , 500 , 000 1 , 800 , 000 11 , 300 , 000 ​ $1 , 200 , 000 ​ ​  Light  $6 , 804 , 000 4 , 000 , 000 1 , 000 , 000 1 , 200 , 000 6 , 200 , 000 $604 , 000 ​ ​     OTHER INFORMATION:1. On December 31, 20X2, Light had a building with a fair value that was $4,900,000 and an estimated remaining useful life of 20 years.2. On December 31, 20X2, Light had a trademark that had a fair value of $60,000. The trademark has an expected useful life of five years.3. During 20X3, Light sold merchandise to Dark for $150,000, a price that included a gross profit of $50,000. During 20X3, 40% of this merchandise was resold by Dark and the other 60% remained in its December 31, 20X3, inventories.4. On December 31, 20X4, the inventories of Dark contained merchandise purchased from Light on which Light had recognized a gross profit in the amount of $20,000. Total sales from Light to Dark were $150,000 during 20X4.5. During 20X4, Dark declared and paid dividends of $300,000 while Light declared and paid dividends of $100,000.6. Dark accounts for its investment in Light using the cost method.Required:Calculate the non-controlling interest on the consolidated statement of financial position at December 31, 20X4, under the entity method.Calculate the NCI's share of earnings for 20X4.

Luis Angel Rivera · Accepted Answer

Final Answer :  Entity Method   Non-controlling interest is 25% × 8,000,000 (fair value)= 2,000,000        Details   Amount   Net income of Light for 20X4 ( separate entity financial statement)  604 , 000  Add: Realized profit on upstream sale of inventory in previous year  30 , 000  Less:   Unrealized profit on upstream sale of inventory in current year  ( 20 , 000 )  Amortization of FVA during the year  ( 47 , 000 )  Adjusted net income of Light for 20X4  567 , 000  NCI’s share  @ 25 % 141 , 750 \begin{array} { | l | r | } \hline 	ext { Details }  &  	ext { Amount } \\hline 	ext { Net income of Light for 20X4 ( separate entity financial statement) }  &  604,000 \\hline 	ext { Add: Realized profit on upstream sale of inventory in previous year }  &  30,000 \\hline 	ext { Less: }  &   \\hline 	ext { Unrealized profit on upstream sale of inventory in current year }  & ( 20,000 )\\hline 	ext { Amortization of FVA during the year }  &  ( 47,000 )  \\hline 	ext { Adjusted net income of Light for 20X4 }  &   567,000\\hline 	ext { NCI ' s share } @ 25 \%  &  141,750 \\hline\end{array}  Details   Net income of Light for 20X4 ( separate entity financial statement)   Add: Realized profit on upstream sale of inventory in previous year   Less:   Unrealized profit on upstream sale of inventory in current year   Amortization of FVA during the year   Adjusted net income of Light for 20X4   NCI’s share  @25% ​  Amount  604 , 000 30 , 000 ( 20 , 000 ) ( 47 , 000 ) 567 , 000 141 , 750 ​ ​

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