Carlson, Inc. owns 80 percent of Madrid, Inc. Carlson reports net income for 2013 (without consideration of its investment in Madrid, Inc.) of $1,500,000. For the same year, Madrid reports net income of $705,000. Carlson had bonds payable outstanding on January 1, 2013 with a carrying value of $1,200,000. Madrid acquired the bonds on the open market on January 3, 2013 for $1,090,000. For the year 2013, Carlson reported interest expense on the bonds in the amount of $96,000, while Madrid reported interest income of $94,000 for the same bonds. What is Carlson's share of consolidated net income?
A) $2,064,000.
B) $2,066,000.
C) $2,176,000.
D) $2,207,000.
E) $2,317,000.

Question

Quizplus · Accepted Answer

Parent's Income $1,500,000 + Loss on Bond Sale $110,000 - Bond Interest $94,000 + Bond Income $96,000 + Sub's Income to Parent $564,000 ($705,000 × .80) = $2,176,000 Consolidated Income