Keefe Inc, a calendar-year corporation, acquires 70% of George Company on September 1, 2014, and an additional 10% on January 1, 2015. Total annual amortization of $6,000 relates to the first acquisition. George reports the following figures for 2015: Without regard for this investment, Keefe independently earns $300,000 in net income during 2015.
All net income is earned evenly throughout the year.
What is the controlling interest in consolidated net income for 2015?
A) $380,000.
B) $375,200.
C) $375,800.
D) $376,000.
E) $400,000.

Question

Keefe Inc, a calendar-year corporation, acquires 70% of George Company on September 1, 2014, and an additional 10% on January 1, 2015. Total annual amortization of $6,000 relates to the first acquisition. George reports the following figures for 2015:  Without regard for this investment, Keefe independently earns $300,000 in net income during 2015.
All net income is earned evenly throughout the year.
What is the controlling interest in consolidated net income for 2015?
A) $380,000. 
B) $375,200. 
C) $375,800. 
D) $376,000. 
E) $400,000.

Quizplus · Accepted Answer

First, we need to calculate the net income attributable to George Company.

Net income of George Company = $80,000 + $20,000 - $6,000 (amortization) 
= $94,000

The controlling interest in consolidated net income for 2015 can be calculated as follows:

Controlling interest = Keefe's net income + (Controlling interest percentage x Net income of George Company)

Controlling interest percentage = 70% + 10% x (100% - 70%) = 79%

Controlling interest = $300,000 + (0.79 x $94,000) 
= $375,200

Therefore, the correct answer is choice letter B, $375,200.

Keefe Inc, a Calendar-Year Corporation, Acquires 70% of George Company