Fair value of the noncontrolling interest

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On January 2, Year 7, Big Inc. with no prior equity interest in Small Corp. purchased 90% of its 100,000 outstanding common shares for cash of $155,000. On that date, (1) the Small's equity equaled $150,000, (2) the acquisition-date fair values of Small's assets and liabilities equaled their carrying amounts, and (3) the fair value of the noncontrolling interest (NCI) was 10% of the implied fair value of Small.

On January 3, Year 7, Small sold equipment with an original cost of $30,000 and a carrying amount of $15,000 to Big for $36,000. The equipment had a remaining life of 3 years and was depreciated using the straight-line method by both companies.  Determine the dollar effect on Year 7 of the adjustment to consolidated income before considering any noncontrolling interest. Ignore income tax considerations. Enter all amounts as positive balances with appropriate commas. Do not use $'s or decimals.

Reference no: EM132420642

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