On January 2,20X2,Piranha Company acquired 70 percent of Salmon Corporation's common stock for $420,000 cash.At the acquisition date,the book values and fair values of Salmon' assets and liabilities were equal,and the fair value of the noncontrolling interest was equal to 30 percent of the total book value of Salmon.The stockholders' equity accounts of the two companies at the acquisition date are as follows:
Noncontrolling interest was assigned income of $15,000 in Piranha's consolidated income statement for 20X2.
-Based on the preceding information,what will be the amount of net income reported by Salmon Corporation in 20X2?
A)$45,000
B)$50,000
C)$75,000
D)$105,000

Question

On January 2,20X2,Piranha Company acquired 70 percent of Salmon Corporation's common stock for $420,000 cash.At the acquisition date,the book values and fair values of Salmon' assets and liabilities were equal,and the fair value of the noncontrolling interest was equal to 30 percent of the total book value of Salmon.The stockholders' equity accounts of the two companies at the acquisition date are as follows:
  Noncontrolling interest was assigned income of $15,000 in Piranha's consolidated income statement for 20X2.
-Based on the preceding information,what will be the amount of net income reported by Salmon Corporation in 20X2?
A)$45,000 
B)$50,000 
C)$75,000 
D)$105,000

Quizplus · Accepted Answer

Since Piranha Company acquired 70% of Salmon Corporation's common stock, it has a controlling interest in the company. Therefore, Salmon Corporation's net income will be consolidated with Piranha Company's net income in Piranha's consolidated income statement. 
The noncontrolling interest is entitled to their share of the subsidiary's net income, which is calculated as 30% of Salmon Corporation's net income. We are given that the noncontrolling interest was assigned income of $15,000 in Piranha's consolidated income statement for 20X2. 
Thus, Salmon Corporation's net income for 20X2 can be calculated as follows: 
Net income attributable to Piranha Company = Consolidated net income - Noncontrolling interest's share 
$15,000 = Consolidated net income * 30% 
Consolidated net income = $50,000 
Since Piranha Company acquired 70% of Salmon Corporation's common stock, it will report 70% of Salmon Corporation's net income in its consolidated income statement. 
70% of $50,000 = $35,000 
Therefore, the answer is B. $50,000.

On January 2,20X2,Piranha Company Acquired 70 Percent of Salmon Corporation's