Advanced Accounting 10th Edition by Thomas Schaefer, Joe Ben Hoyle, Timothy Doupnik

Exercise 43

Assume the same basic information as presented in problem 33 except that Monica employs the equity method of accounting.Hence, it reports $102,740 investment income for 2011 with an Investment account balance of $826,220.Under these circumstances, prepare the worksheet entries required for the consolidation of Monica Company and Young Company.
Problem 33:
On January 1, 2009, Monica Company acquired 70 percent of Young Company's outstanding common stock for $665,000.The fair value of the noncontrolling interest at the acquisition date was $285,000.Young reported stockholders' equity accounts on that date as follows:
In establishing the acquisition value, Monica appraised Young's assets and ascertained that the accounting records undervalued a building (with a five-year life) by $50,000.Any remaining excess acquisition-date fair value was allocated to a franchise agreement to be amortized over 10 years.
During the subsequent years, Young sold Monica inventory at a 30 percent gross profit rate.Monica consistently resold this merchandise in the year of acquisition or in the period immediately following.Transfers for the three years after this business combination was created amounted to the following:
In addition, Monica sold Young several pieces of fully depreciated equipment on January 1, 2010, for $36,000.The equipment had originally cost Monica $50,000.Young plans to depreciate these assets over a six-year period.
In 2011, Young earns a net income of $160,000 and distributes $50,000 in cash dividends.These figures increase the subsidiary's Retained Earnings to a $740,000 balance at the end of 2011.During this same year, Monica reported dividend income of $35,000 and an investment account containing the initial value balance of $665,000.
Prepare the 2011 consolidation worksheet entries for Monica and Young.In addition, compute the noncontrolling interest's share of the subsidiary's net income for 2011.