Pant Inc.owns 80% of Sockswear Co.During 2014, they reported revenues and expenses as follows: Pant revenues $10 million, expenses $8.5 million; Sockswear revenue $3.0 million, expenses $2.5 million.There were no intercompany sales.What would be the amount reported as consolidated net income?

Question

Quizplus · Accepted Answer

Consolidated net income is calculated by adding the net income of both companies. Pant's net income is $1.5 million ($10 million - $8.5 million), and Sockswear's net income is $0.5 million ($3 million - $2.5 million). Together, the consolidated net income is $2 million. However, since Pant owns 80% of Sockswear, only 80% of Sockswear's net income is included, which is $0.4 million. Therefore, the consolidated net income is $1.5 million + $0.4 million = $1.9 million.

Pant IncOwns 80% of Sockswear Co