Campbell Inc.owned all of Gordon Corp.For 2018, Campbell reported net income (without consideration of its investment in Gordon) of $280,000 while the subsidiary reported $112,000.There are no excess amortizations associated with this consolidation.The subsidiary had bonds payable outstanding on January 1, 2018, with a book value of $297,000.The parent acquired the bonds on that date for $281,000.During 2018, Campbell reported interest income of $31,000 while Gordon reported interest expense of $29,000.What is consolidated net income for 2018?
A) $406,000.
B) $374,000.
C) $378,000.
D) $410,000.
E) $394,000.

Question

Quizplus · Accepted Answer

Consolidated net income is the sum of the parent's net income and the subsidiary's net income, adjusted for any intercompany transactions. In this case, the intercompany transaction is the sale of bonds from Gordon to Campbell. The parent's net income is $280,000, and the subsidiary's net income is $112,000. The intercompany transaction resulted in a gain of $16,000 for Campbell, which is added to consolidated net income. Therefore, consolidated net income is $280,000 + $112,000 + $16,000 = $408,000.