Big Time Company owns all of the stock of Peterson Corporation and 80% of the stock of Tysen Corporation. Big Time Company earned net income of $750,000; Peterson earned $250,000; and Tysen earned $175,000. Big Time Company's consolidated income statement would report net income of:

Question

Quizplus · Accepted Answer

To calculate the consolidated net income, we need to add the net incomes of Big Time Company, Peterson Corporation, and Tysen Corporation. However, since Big Time Company owns 100% of Peterson Corporation, we need to eliminate the intercompany profit in Peterson's net income. Similarly, since Big Time Company owns 80% of Tysen Corporation, we need to eliminate the 20% of Tysen's net income that is attributed to the non-controlling interest.

Net Income for Big Time Company = $750,000
Net Income for Peterson Corporation = $250,000 (but eliminate 100% of intercompany profit) 
= $250,000 - $0 = $250,000
Net Income for Tysen Corporation = $175,000 (but eliminate 20% of non-controlling interest)
= $175,000 - ($175,000 x 20%) = $140,000

Consolidated Net Income = $750,000 + $250,000 + $140,000 
= $1,140,000

Therefore, the correct answer is C, $1,140,000.

Big Time Company Owns All of the Stock of Peterson