Reference no: EM132704796

Question - On January 1, 2017, Doone Corporation acquired 70 percent of the outstanding voting stock of Rockne Company for $462,000 consideration. At the acquisition date, the fair value of the 30 percent noncontrolling interest was $198,000 and Rockne's assets and liabilities had a collective net fair value of $660,000. Doone uses the equity method in its internal records to account for its investment in Rockne. Rockne reports net income of $220,000 in 2018. Since being acquired, Rockne has regularly supplied inventory to Doone at 25 percent more than cost. Sales to Doone amounted to $280,000 in 2017 and $380,000 in 2018. Approximately 40 percent of the inventory purchased during any one year is not used until the following year.

Required -

a. What is the noncontrolling interest's share of Rockne's 2018 income?

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