Theo Corporation has the following sales and expenses in 20X1, excluding any amounts related to its investment in Caratini Corporation. Next to Theo’s amounts are the 20X1 sales and expenses for Caratini Corporation. There is no excess cost associated with Theo’s investment in Caratini.
Required:
For each of three independent scenarios, determine the amounts for sales, net income, and net income attributable to Theo shareholders, that Theo would report in its 20X1 external financial statements, in accordance with U.S. GAAP. Theo and Caratini have no intercompany sales. Ignore income taxes.
1. Theo owns 25% of Caratini and applies the equity method.
2. Theo owns 80% of Caratini and consolidates.
3. Theo owns 100% of Caratini and consolidates.
