Big Co. purchased 60% of Little Co. stock during 2022. During 2022, Little Co. sold inventory to Big Co for $100,000. The merchandise originally cost Little Co. $70,000.

During 2022, Big Co resold 40% of this merchandise to third parties. The remainder was resold during 2023.

Little Co reports earnings of $100,000 each year.

 What was the total gross profit on the intercompany sale of merchandise in 2022?

How much of the gross profit was realized in 2022?

Assume that in 2023 there were no additional intercompany sales of merchandise.

What is the income to the NC Interest in 2023?

kindly get the answers below.

Step-by-step explanation

gross profit on the intercompany sale of merchandise in 2022 = Sale by Little Co. to Big Co. ( A ) -Original Cost to Little

Gross profit on the intercompany sale of merchandise in 2022=100,000-70,000

                                                                                                 =$30,000

Gross profit realized in 2022 will be;

Gross profit on the intercompany sale of merchandise in 2022 x 40%

30,000 x 40%

$12,000

Assuming that in 2023 there were no additional intercompany sales of merchandise the income to the NC Interest in 2023 will be;

Income to the non-controlling Interest in 2023 = gross profit on the intercompany sale of merchandise in 2022- Gross profit realized in 2022

Income to the non-controlling Interest in 2023=30,000-12,000

                                                     =$18,000

Therefore,

Big co. share =60%

Non-Controlling Interest Share ( Balance)  = 40%

Income to non-controlling interest will be,

Income to the non-controlling Interest in 2023 x 40%

Income to non-controlling interest= 18,000 x 40%

                                                      =$7,200