Primer Company acquired an 80% interest in SealCoat Company on January 1, 2013, for $450,000 cash when SealCoat Company had common stock of $250,000 and retained earnings of $250,000.All excess was attributable to plant assets with a 10-year life.SealCoat Company made $50,000 in 2013 and paid no dividends.Primer Company's separate income in 2013 was $625,000.The controlling interest in consolidated net income for 2013 is:
A)$675,000.
B)$665,000.
C)$660,000.
D)$625,000.

Question

Quizplus · Accepted Answer

To find the controlling interest in consolidated net income, we need to first calculate the subsidiary's net income and then adjust for the non-controlling interest.
Subsidiary's net income for 2013 = $50,000
Excess paid for the subsidiary = Purchase price - Book value = $450,000 - ($250,000 + $250,000) = $-50,000
This means that the excess paid for the subsidiary is actually a goodwill impairment of $50,000, which needs to be recognized as an expense in the consolidated financial statements.
Adjusted net income for the subsidiary = $50,000 - $50,000 = $0
Controlling interest in consolidated net income = Parent company's income + (Parent company's ownership percentage x Adjusted net income for subsidiary)
= $625,000 + (80% x $0)
= $625,000
Therefore, the answer is option C.

Primer Company Acquired an 80% Interest in SealCoat Company on January