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On January 1, 2011, Global Inc.acquired 100% of National Co.'s voting shares for $900,000.The fair market value of National's net assets was $825,000 which equaled their book value.During 2011, National earned $275,000 and paid out cash dividends of $125,000.Goodwill resulting from the acquisition was reviewed by management who determined that no impairment in value had occurred.Global earned net income, excluding National, of $1,200,000 and paid dividends of $200,000.
-The consolidated net income for the year would be:

Question

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On January 1, 2011, Global Inc.acquired 100% of National Co.'s voting shares for $900,000.The fair market value of National's net assets was $825,000 which equaled their book value.During 2011, National earned $275,000 and paid out cash dividends of $125,000.Goodwill resulting from the acquisition was reviewed by management who determined that no impairment in value had occurred.Global earned net income, excluding National, of $1,200,000 and paid dividends of $200,000.
-The consolidated net income for the year would be:

Quizplus · Accepted Answer

The consolidated net income includes Global's net income plus National's net income because Global acquired 100% of National. Global's net income is $1,200,000, and National's net income is $275,000. Adding these together gives a consolidated net income of $1,475,000.

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