On January 1,2014,a parent company purchased 90 percent of the stock in a subsidiary.On January 1,2010,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?

Question

On January 1,2014,a parent company purchased 90 percent of the stock in a subsidiary.On January 1,2010,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?

Quizplus · Accepted Answer

The consolidated net income is the parent company's net income plus the subsidiary's net income attributable to the parent. Since the parent owns 90% of the subsidiary, the consolidated net income is $100 million + (90% of $50 million) = $145 million.

On January 1,2014,a Parent Company Purchased 90 Percent of the Stock