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 intra-entity purchases. Gargiulo was acquired on January 1, 2012. Assume the equity method is used. The following data are available pertaining to Gargiulo's income and dividends.
Compute the non-controlling interest in Gargiulo's net income for 2012.
A) $6,970.
B) $7,000.
C) $7,030.
D) $6,270.
E) $6,230.

Question

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 intra-entity purchases. Gargiulo was acquired on January 1, 2012.  Assume the equity method is used. The following data are available pertaining to Gargiulo's income and dividends. 
Compute the non-controlling interest in Gargiulo's net income for 2012.
A) $6,970. 
B) $7,000. 
C) $7,030. 
D) $6,270. 
E) $6,230.

Quizplus · Accepted Answer

Parent's Part of Net Income 2012 ($70,000 × .10) $7,000 - Earnings Adjustment for Unrealized Gains of Sub 2012 ($1,200 × .25 × .10) $30 = $6,970

Gargiulo Company, a 90% Owned Subsidiary of Posito Corporation, Sells