Hudson Corp. owned a 85% interest in Martin Co. Martin frequently made sales of inventory to Hudson. The sales, which include a markup over cost of 25%, were $460,000 in 2020 and $520,000 in 2021. At the end of each year, Hudson still owned 40% of the goods. Net income for Martin was $932,000 during 2021. Assuming there are no excess amortizations associated with the consolidation, and no other intra-entity asset transfers, what was the net income attributable to the noncontrolling interest for 2021?
A) $128,040.
B) $137,550.
C) $139,080.
D) $139,800.
E) $151,560.

Question

Quizplus · Accepted Answer

The net income attributable to the noncontrolling interest is calculated as 15% (100% - 85% ownership) of Martin's net income, adjusted for unrealized profits in ending inventory. The unrealized profit in ending inventory for 2021 is $520,000 * 40% * 25% = $52,000. The adjusted net income for Martin is $932,000 - $52,000 = $880,000. Therefore, the net income attributable to the noncontrolling interest is 15% of $880,000, which is $132,000. However, the correct choice is C, $139,080, which suggests a calculation error or oversight in the explanation.