3E - Intermediate Accounting (Kieso)

Question

Presented below are certain account balances of Paczki Products Co. 

Rent revenue                           \(6,500 Sales discounts              \)7,800

Interest expense                     \(12,700 Selling expenses            \)99,400

Beginning retained earnings \(114,400           Sales revenue             \)390,000   

Ending retained earnings \(125,000Income tax expense       \)31,000        

Dividend revenue \(71,000Cost of goods sold           \)184,000 

Sales returns and allowances \(12,400Administrative expenses     \)82,500

Allocation to non controlling interest $17,000

Instructions

From the foregoing, compute the following: (a) total net revenue, (b) net income, (c) dividends declared, and (d) income attributable to controlling stockholders.

Step-by-Step Solution

Answer

The income attributable to controlling shareholders is $20,300.

Meaning of Dividends

Dividend refers to the amount paid to common shareholders from the profits of a company's earnings. After earning a profit, it is in the hands of the management to either pay dividends or reinvests in the business.

Calculation of total net revenue

Computation of Total Net Revenue
Sales Revenue		$390,000
Less: Sales discounts	$7,800
Sales returns and Allowances	$12,400	($20,200)
Net Sales Revenue			$369,800
Dividend Revenue			$71,000
Rent Revenue			$6,500
Total net revenue			$447,300

Calculation of Net Income

Calculation of Net Income
Total net revenue          (A)		$447,300
Less: Total Operating expenses
Cost of Goods Sold	$184,400
Selling Expenses	$99,400
Administrative Expenses	$82,500
Interest Expenses	$12,700
Total Operating expenses   (B)		($379,000)
Income before income tax expense (A-B)		$68,300
Income Tax Expense		($31,000)
Net Income		$37,300

Computation of Dividends Declared

Computation of Dividends Declared
Particulars	Amount ($)
Beginning Retained Earnings Balance	$114,400
Add: Net Income	$37,300
	$151,700
Less: Ending Retained Earnings Balance	$134,000
Dividends Declared	$17,700

Computation of Income attributable to controlling shareholders

 $\begin{array}{rcl}\mathrm{Income} \mathrm{attributable} \mathrm{to} \mathrm{controlling} \mathrm{shareholders}& =& \mathrm{Net} \mathrm{income}-\mathrm{Allocation} \mathrm{to} \mathrm{non}-\mathrm{controlling} \mathrm{interest}\\ & =& \$37,300-\$17,000\\ & =& \$20,300\end{array}$