Reference no: EM132493135

Question - On January 1, 2017, Doone Corporation acquired 60 percent of the outstanding voting stock of Rockne Company for $564,000 consideration. At the acquisition date, the fair value of the 40 percent noncontrolling interest was $376,000 and Rockne's assets and liabilities had a collective net fair value of $940,000. Doone uses the equity method in its internal records to account for its investment in Rockne. Rockne reports net income of $360,000 in 2018. Since being acquired, Rockne has regularly supplied inventory to Doone at 25 percent more than cost. Sales to Doone amounted to $420,000 in 2017 and $520,000 in 2018. Approximately 35 percent of the inventory purchased during any one year is not used until the following year.

Required -

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

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