Patty Corporation holds 75 percent of Slider Corporation's voting common stock,acquired at book value.The fair value of the noncontrolling interest at the date of acquisition was equal to 25 percent of the book value of Slider Corporation.On December 31,20X8,Slider Corporation acquired 25 percent of Patty Corporation's stock.Slider records dividends received from Patty as nonoperating income.In 20X9,Patty reported operating income of $100,000 and paid dividends of $40,000.During the same year,Slider reported operating income of $75,000 and paid $20,000 in dividends.
-Based on the information provided,what amount will be reported as consolidated net income for 20X9 under the treasury stock method?

Question

Quizplus · Accepted Answer

Under the treasury stock method, the investment by Slider in Patty is essentially ignored for consolidation purposes, as it is treated as if the parent company (Patty) had bought back its own shares. Therefore, the consolidated net income is simply the sum of Patty's and Slider's reported incomes without any adjustments for intercompany dividends. Patty reported operating income of $100,000, and Slider reported operating income of $75,000. The sum is $175,000.

Patty Corporation Holds 75 Percent of Slider Corporation's Voting Common