Reference no: EM132725164

On January 1, 2017, Doone Corporation acquired 80 percent of the outstanding voting stock of Rockne Company for $784,000 consideration. At the acquisition date, the fair value of the 20 percent noncontrolling interest was $196,000 and Rockne's assets and liabilities had a collective net fair value of $980,000. Doone uses the equity method in its internal records to account for its investment in Rockne. Rockne reports net income of $380,000 in 2018. Since being acquired, Rockne has regularly supplied inventory to Doone at 25 percent more than cost. Sales to Doone amounted to $440,000 in 2017 and $540,000 in 2018. Approximately 30 percent of the inventory purchased during any one year is not used until the following year.

Problem 1: What is the noncontrolling interest's share of Rockne's 2018 income?

Problem 2: Prepare Doone's 2018 consolidation entries required by the intra-entity inventory transfers.