Question

A Parent Company owns 100 percent of its Subsidiary. During 2018, the Parent company reports net income (by itself, without any investment income from its Subsidiary) of $650,000 and the subsidiary reports net income of $260,000. The parent had a bond payable outstanding on January 1, 2018, with a carrying value equal to $546,000. The Subsidiary acquired the bond on January 1, 2018 for $513,500. During 2018, the Parent reported interest expense (related to the bond) of $45,500, while the Subsidiary reported interest income (related to the bond) of $41,600. What is consolidated net income for the year ended December 31, 2018

Answer 1

$913,900

Step-by-step explanation:

Calculation to determine the consolidated net income for the year ended December 31, 2018

Using this formula

Ending consolidated net income =(2018 Parent company net income+Subsidiary reports net income)+(Parent reported interest expense-Subsidiary reported interest income)

Let plug in the formula

Ending consolidated net income=( $650,000+ $260,000)+($45,500-$41,600

Ending consolidated net income= $650,000+ $260,000+ $3,900

Ending consolidated net income=$913,900

Therefore the consolidated net income for the year ended December 31, 2018 is $913,900