On January 1,2014,Palling Corporation Purchased 70% of the Common Stock

question 35

Essay

On January 1,2014,Palling Corporation purchased 70% of the common stock of Sam's Storage Systems for $320,000 when Sam's had Common Stock outstanding of $100,000 and Retained Earnings of $200,000.Any excess differential was attributed to goodwill.
At the end of 2014,Palling and Sam's had unrealized inventory profits from intercompany sales of $6,000 and $8,000,respectively.These year-end profit amounts were realized in 2015.At the end of 2015,Palling held inventory acquired from Sam's with a $10,000 unrealized profit.Palling reported separate income of $100,000 for 2015 and paid dividends of $30,000.Sam's reported separate income of $70,000 for 2015 and paid dividends of $20,000.
Required:
Compute the controlling interest share of consolidated net income for 2015.

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Definitions:

Reduction in Basis

A decrease in the tax basis of an asset, which could result from deductions such as depreciation, or after receiving tax-free returns of capital.

Self-employment Income

Income earned from conducting a business or profession as a sole proprietor, independent contractor, or freelancer, subject to self-employment tax.

Nondeductible Expense

A cost incurred by a taxpayer that cannot be deducted from income when calculating taxes owed.

Cash Distribution

The payment of earnings from a corporation or a fund to its shareholders or investors.