Create,Inc. ,a domestic corporation,owns 100% of Vinyl,Ltd. ,a foreign corporation and Digital,Inc. ,a domestic corporation.Create also owns 12% of Record,Inc. ,a domestic corporation.Create receives no distributions from any of these corporations.Which of these entities' net income are included in Create's income statement for current year financial reporting purposes?

Question

Quizplus · Accepted Answer

Only the net income of Create, Vinyl, and Digital are included in Create's income statement because Create owns 100% of Vinyl and Digital. However, only companies in which Create owns a majority interest (more than 50%) are consolidated for financial reporting purposes. Therefore, while Create owns 12% of Record, it does not control the company and its income is not included in Create's income statement.