On January 1,2014,a parent company purchased 100 percent of the stock in a subsidiary.On January 1,2014,no goodwill was recorded and the book value of the subsidiary's assets equals the market value of the subsidiary's assets.On December 31,2014,the two companies report the following data:
$\begin{array} { l }
\text { Parent Company Net Income for Past Year}& \text {\$ 100 million }\
\text { Subsidiary Company Net Income for Past Year }& \text {\$ 50 million }\
\end{array}$

What is the consolidated net income for the year ended December 31,2014?
A) $0
B) $50 million
C) $100 million
D) $150 million

Question

On January 1,2014,a parent company purchased 100 percent of the stock in a subsidiary.On January 1,2014,no goodwill was recorded and the book value of the subsidiary's assets equals the market value of the subsidiary's assets.On December 31,2014,the two companies report the following data:
$\begin{array} { l  } 
 \text { Parent Company Net Income for Past Year}& \text {\$ 100 million }\
 \text {  Subsidiary Company Net Income for Past Year }& \text {\$ 50 million }\
\end{array}$

What is the consolidated net income for the year ended December 31,2014?
A) $0
B) $50 million
C) $100 million
D) $150 million

Quizplus · Accepted Answer

When consolidating financial statements, the parent company includes 100% of its own net income and 100% of its subsidiary's net income. Therefore, the consolidated net income is the sum of the parent company's net income ($100 million) and the subsidiary's net income ($50 million), totaling $150 million.

On January 1,2014,a Parent Company Purchased 100 Percent of the Stock