Soal E11-7

Bhima Corporation is an 80 percent-owned subsidiary of Krishna Corporation. During 2016,

Bhima sold land that cost $50,000 to Krishna for $60,000. On at December 31, 2016, Bhima’s
ending balance of onventory included $5,000 unrealized profit from intercompany transactions.
Separate incomeof Krishna and Bhima for 2016 were $600,000 and $250,000, respectively.

Required
1. Determine consollidated net income under the parent-company theory of consollidation.
2. Determine consollidated net income and its allocation to controlling and noncontrolling
interest under entity theory.

Jawaban

1. Parent Company Theory

Combined separate income of Krishna and Bhima $850,000
Less : Krishna’s share of unrealized inventory
profits from downstream sales (5,000)
Unrealized profit on upstream sale of land
($60,000 - $50,000) x 80% (8,000)
Less : Noncontrolling interest share
($250,000 x 20%) (50,000)
Consolidated net income $787,000

2. Entity Theory
Combined separate income of Krishna and Bhima $850,000
Less : Krishna’s share of unrealized inventory
profits from downstream sales (5,000)
Unrealized profit on upstream sale of land
($60,000 - $50,000) x 100% (10,000)
Total Consolidated net income $835,000
Allocated to controlling stockholders
($600,000 – $5,000) + ($240,000 x 80%) $787,000
Allocated to noncontrolling stockholders
($250,000 - $10,000) x 20%) (48,000)