[Sandy]

I saw this question on Wiley test bank and I think the answer is the old concept of NCI.
The new concept should be: FV of NCI at the date of acquisition+ NCI’s share of net income – NCI’s share of dividends paid ( not including any PPE depreciation)
So the answer should be 213,000.

Any ideas?

On January 1, 20×6, Ritt Corp. purchased 80% of Shaw Corp.’s $10 par common stock for $975,000, which included a control premium. On this date, the fair value of the noncontrolling interest was $200,000, giving Shaw a full fair value of $1,175,000. On the acquisition date the carrying amount of Shaw’s net assets was $1,000,000. The fair values of Shaw’s identifiable assets and liabilities were the same as their carrying amounts except for plant assets (net), which were $100,000 in excess of the carrying amount. Those plant assets had a 10-year remaining life, depreciated on a straight-line basis. Shaw had a net income of $190,000 and paid cash dividends totaling $125,000. Which one of the following is the amount of noncontrolling interest that should be reported in a consolidated balance sheet prepared December 31, 20×6?

$213,000

$235,000

$246,000 (correct)

$248,000

This Answer is Correct
The noncontrolling interest on December 31, 20×6, is the noncontrolling interest (NCI) as of the acquisition date, plus the NCI share of Shaw’s net income, less the NCI share of Shaw’s dividends, less the NCI share of the depreciation of the plant asset revaluation. The consolidated net assets attributable to Shaw on January 1, 20×6, would include the book value of the net assets on the date of the combination ($1,000,000), plus the write up of the plant assets to fair value ($100,000), plus the goodwill at acquisition ($75,000) or $1,175,000 × 20% = $235,000. January 1, 20×6 NCI would be adjusted for Shaw’s net operating results for 20×6 ($190,000), less 20% of the worksheet depreciation taken on the write up of plant assets ($100,000/10 years =) $10,000 less the dividends paid by Shaw during 20×6 ($125,000).

January 1, 20×6 NCI equity $235,000
+ 20×6 Net Income (190,000 × .2) 38,000
− 20×6 Dividends (125,000 × .2) (25,000)
− 20×6 Depreciation of plant assets (10,000 × .2) ( 2,000)
December 31, 20×6 NCI equity $246,000

[Adam]

i think the answer wiley provided is based on IFRS concept, which is available to evaluate NCI using the proportionate of fair value of the company.

[Author]

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