[stevemiller]

On January 1, 20X1, Wayne Corp. purchased 70% of Payne Corp.'s $10 par common stock for $900,000. On this date, the carrying amount of Payne's net assets was $1,000,000. The fair values of Payne's identifiable assets and liabilities were the same as their carrying amounts except for plant assets (net), which were $200,000 in excess of the carrying amount. For the year ended December 31, 20X1, Payne had net income of $150,000 and paid cash dividends totaling $90,000. Excess attributable to plant assets is amortized over 10 years.

In the December 31, 20X1, consolidated balance sheet, noncontrolling interest should be reported at _______.

a. $282,500 b. $300,500 c. $318,000 d. $345,000

This problem is solved by taking the fair value of NCI and adding share of net income, less share of dividends. Now, I can easily solve for the share of net income and the share of dividends. Does anyone know how to figure for the fair value of NCI?

[rehmanvohra]

We can not solve the problem for you unless you show us your attempt so that we can guide you where you are wrong. However, as a suggestion, divide the answer is each option by the non controlling interest and you will get the net assets of subsidiary at year end. Calculate the net assets at year end to match these answers.

[stevemiller]

Ok, so, a. $282,500 b. $300,500 c. $318,000 d. $345,000 each divided by 30% is equal to, respectively: a. 941,666.67 b. 1,001,666.67 c. 1,060,000 d. 1,150,000


So, net assets would be 1,200,000 - amortization of 20,000*.70 for the year = 14,000. This doesn't match any of the answers. What am I doing wrong?

Is it like this: 1,200,000 - 200,000 x .70 = 1,060,000? The 200,000 is the excess of cost over book and I multiplied it by the controlling interest?

[rehmanvohra]

You still are missing an important point. The net assets of Payne at year end is:
Carrying Value
+Appraisal value less amortization
+Net income
-Dividends
Total net assets x 0.30 for NCI

NCI are also entitled to appraisal value. I have tried all options given but it seems there is something wrong here.