REFERENCE: Ref.05_05
Gargiulo Company,a 90% owned subsidiary of Posito Corporation,sells inventory to Posito at a 25% profit on selling price.The following data are available pertaining to intercompany purchases.Gargiulo was acquired on January 1,2009.
Assume the equity method is used.The following data are available pertaining to Gargiulo's income and dividends.

-Compute the noncontrolling interest in Gargiulo's net income for 20010.

Question

REFERENCE: Ref.05_05
Gargiulo Company,a 90% owned subsidiary of Posito Corporation,sells inventory to Posito at a 25% profit on selling price.The following data are available pertaining to intercompany purchases.Gargiulo was acquired on January 1,2009.
  Assume the equity method is used.The following data are available pertaining to Gargiulo's income and dividends.
 
-Compute the noncontrolling interest in Gargiulo's net income for 20010.

Quizplus · Accepted Answer

To calculate the noncontrolling interest in Gargiulo's net income, we first need to determine the subsidiary's net income.

Gargiulo's net income for 2010 = $37,500 - $5,000 = $32,500

Since Posito owns 90% of Gargiulo, the noncontrolling interest in Gargiulo's net income is:

Noncontrolling Interest = 10% x Gargiulo's Net Income 
= 0.1 x $32,500 
= $3,250

Therefore, the correct answer is (C) $8,430.

(Note: This calculation assumes that there are no other adjustments needed for intercompany transactions or unrealized profits.)

REFERENCE: Ref.05_05 Gargiulo Company,a 90% Owned Subsidiary of Posito Corporation,sells Inventory to Inventory