Big Corporation receives management consulting services from its 92 percent owned subsidiary, Small Inc. During 20X7, Big paid Small $125,432 for its services. For the year 20X8, Small billed Big $140,000 for such services and collected all but $7,900 by year-end. Small's labor cost and other associated costs for the employees providing services to Big totaled $86,000 in 20X7 and $121,000 in 20X8. Big reported $2,567,000 of income from its own separate operations for 20X8, and Small reported net income of $695,000.
Based on the preceding information, what amount of consolidated net income should be reported in 20X8?
A) $3,262,000
B) $4,050,000
C) $3,254,100
D) $3,122,000

Question

Quizplus · Accepted Answer

The Answer of Big Corporation receives management consulting services from its 92 percent owned subsidiary, Small Inc. During 20X7, Big paid Small $125,432 for its services. For the year 20X8, Small billed Big $140,000 for such services and collected all but $7,900 by year-end. Small's labor cost and other associated costs for the employees providing services to Big totaled $86,000 in 20X7 and $121,000 in 20X8. Big reported $2,567,000 of income from its own separate operations for 20X8, and Small reported net income of $695,000.
Based on the preceding information, what amount of consolidated net income should be reported in 20X8?
A) $3,262,000
B) $4,050,000
C) $3,254,100
D) $3,122,000

Big Corporation Receives Management Consulting Services from Its 92 Percent