Femur Co. acquired 70% of the voting common stock of Harbor Corp. on January 1, 2019. During 2019, Harbor had revenues of $2,500,000 and expenses of $2,000,000. The amortization of fair value allocations totaled $60,000 in 2019. Not including its investment in Harbor, Femur Co. had its own revenues of $4,500,000 and expenses of $3,000,000 for the year 2019.

The noncontrolling interest's share of the earnings of Harbor Corp. for 2019 is calculated to be:

a. What amount of consolidated net income for 2019 should be allocated to Femur’s controlling interest in Harbor?

b. What amount would Femur Co. report as consolidated net income for 2019?

Explanation:

The noncontrolling interest's share of the earnings of Harbor Corp. for 2019

= ($2,500,000 - $2,000,000- $60,000) * 0.3 = 440,000*0.3 = $132,000

Amount of consolidated net income for 2019 should be allocated to Femur’s controlling interest in Harbor

= $440,000 - $132,000 = $308,000

Amount Femur Co. would report as consolidated net income for 2019:

= $(4,500,000-3,000,000) + $308,000 = $1,500,000 + $308,000 = $1,808,000

$132,000

a. $308,000

b. $1,808,000

Explanation:

We have to first calculate Harbor’s net income for 2019 as follows:

Harbour’s net income = Harbor’s revenue – Harbor’s expenses – Allocated fair value amortization  

                                    = $2,500,000 - $2,000,000 - $60,000  

Harbour’s net income = $440,000

1. The noncontrolling interest's share of the earnings of Harbor Corp. for 2019 is calculated to be:

Noncontrolling interest’s share of Harbor’s earnings = Harbour’s net income × 30%  

                                                                                        = $440,00 × 30%  

Noncontrolling interest’s share of Harbor’s earnings = $132,000

Therefore, the noncontrolling interest's share of the earnings of Harbor Corp. for 2019 is calculated to be $132,000.

a. What amount of consolidated net income for 2019 should be allocated to Femur’s controlling interest in Harbor?

Femur’s share of Harbour’s net income = Harbour’s net income × 70% = $440,000 × 70% = $308,000

Therefore, the amount of consolidated net income for 2019 that should be allocated to Femur’s controlling interest in Harbor is $308,000.

b. What amount would Femur Co. report as consolidated net income for 2019?

Femur’s net income = Femur’s revenue – Femur’s expenses = $4,500,000 - $3,000,000 = $1,500,000

Femur’s Consolidated Net Income = Femur’s net income + Femur’s share of Harbour’s net income

                                                         = $1,500,000 + $308,000

Femur’s Consolidated Net Income = $1,808,000.

Therefore, the amount that Femur Co. would report as consolidated net income for 2019 is $1,808,000.

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