In 2021, assuming K-Tech has declared no dividends, what are the noncontrolling interest’s share of the subsidiary’s income and the ending balance of the noncontrolling interest in the subsidiary?
a. $26,000 and $230,000
b. $28,800 and $252,000
c. $34,400 and $240,800
d. $40,000 and $252,000
On January 1, 2020, French Company acquired 60 percent of K-Tech Company for $300,000 when K-Tech’s book value was $400,000. The fair value of the newly comprised 40 percent noncontrolling interest was assessed at $200,000. At the acquisition date, K-Tech’s trademark (10-year remaining life) was undervalued in its financial records by $60,000. Also, patented technology (5-year remaining life) was undervalued by $40,000.
In 2020, K-Tech reports $30,000 net income and declares no dividends. At the end of 2021, the two companies report the following figures (stockholders’ equity accounts have been omitted):
