On January 1, 2012, Uncle Company purchased 80 percent of Nephew Companyâ??s capital stockfor $500,0

On January 1, 2012, Uncle Company purchased 80 percent of Nephew Company’s capital stockfor $500,000 in cash and other assets. Nephew had a book value of $600,000 and the 20 percentnoncontrolling interest fair value was $125,000 on that date. On January 1, 2011, Nephew hadacquired 30 percent of Uncle for $280,000. Uncle’s appropriately adjusted book value as of thatdate was $900,000.Separate operating income figures (not including investment income) for these twocompanies follow. In addition, Uncle declares and pays $20,000 in dividends to shareholderseach year and Nephew distributes $5,000 annually. Any excess fair-value allocations areamortized over a 10-year period.Year201220132014UncleNephewCompany Company$ 90,000 $30,000120,00040,000140,00050,000a.Assume that Uncle applies the equity method to account for this investment in Nephew. Whatis the subsidiary’s income recognized by Uncle in 2014?b.What is the noncontrolling interest’s share of 2014 consolidated net income