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On January 1, 2014, Doone Corporation acquired 60 percent of the outstanding voting stock of Rockne Company for $300,000 consideration. At the acquisition date, the fair value of the 40 percent noncontrolling interest was $200,000 and Rockne’s assets and liabilities had a collective net fair value of $500,000. Doone uses the equity method in its internal records to account for its investment in Rockne. Rockne reports net income of $160,000 in 2015. Since being acquired, Rockne has regularly supplied inventory to Doone at 25 percent more than cost. Sales to Doone amounted to $250,000 in 2014 and $300,000 in 2015. Approximately 30 percent of the inventory purchased during any one year is not used until the following year. |
| a. |
What is the noncontrolling interest’s share of Rockne’s 2015 income? |
| b. |
Prepare Doone’s 2015 consolidation entries required by the intra-entity inventory transfers. (If no entry is required for a transaction/event, select “No journal entry required” in the first account field.) |
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