12) Pennack Corporation purchased 75% of the outstanding stock of Shing Corporation on January 1, 2011 for $300,000 cash. At the time of the purchase, the book value and fair value of Shing's assets and liabilities were equal. Shing's balance sheet at the time of acquisition and December 31, 2011 are shown below.
Jan 1, 2011 Dec 31, 2011
Other current assets 175,000160,000
Plant Assets — net 250,000240,000
Total assets 500,000480,000
Liabilities 100,000 50,000
Capital stock 100,000100,000
Retained earnings 300,000330,000
Total liabilities and equity 500,000480,000
Shing earned $60,000 in income during the year, and paid out $30,000 in dividends. Pennack uses the equity method to account for its investment in Shing.
Requirement 1: Calculate Pennack's net income from Shing in 2011.
Requirement 2: Calculate the noncontrolling interest share in Shing's income for 2011.
Requirement 3: Calculate the balance in the Investment in Shing account reported on Pennack's separate general ledger at December 31, 2011.
Requirement 4: Calculate the noncontrolling interest that will be reported on the consolidated balance sheet at December 31, 2011.