Question

James Company acquired 85 percent of Mark-Right Company on April 1. On its December 31 consolidated income statement, how should James account for Mark-Right’s revenues and expenses that occurred before April 1?

Answer 1

revenues and expenses before April 1 will be excluded from the consolidated accounts.

Step-by-step explanation:

Since James Company did not have control of Mark-Right Company before April 1, all revenues and expenses of Mark-Right Company that occurred before the acquisition date of April 1 will be excluded from James Company consolidated accounts.

However, 85 percent of Mark-Right Company's revenue and expenses that occur after April 1 will be included in the consolidated accounts of James Company since the parent had control of the subsidiary.