REFERENCE: Ref.07_11
Delta Corporation owns 90 percent of Sigma Company,and Sigma owns 90 percent of Pi,Inc. ,all of which are domestic corporations.Information for the three companies for the year ending December 31,2009 follows:

-What is Sigma's accrual-based income for 2009?

Question

REFERENCE: Ref.07_11
Delta Corporation owns 90 percent of Sigma Company,and Sigma owns 90 percent of Pi,Inc. ,all of which are domestic corporations.Information for the three companies for the year ending December 31,2009 follows:
 
-What is Sigma's accrual-based income for 2009?

Quizplus · Accepted Answer

Sigma's accrual-based income can be calculated as its revenue minus expenses, which are reported in the table. 
Revenue: $4,000,000 
Expenses: $3,200,000 ($1,400,000 + $1,600,000 + $200,000) 
Accrual-based Income: $800,000 ($4,000,000 - $3,200,000) 
Since Sigma owns 90% of Pi, Inc., Sigma's portion of Pi's net income is: 
$120,000 ($400,000 x 30%) 
Sigma's total income: 
$920,000 ($800,000 + $120,000) 
Since Delta owns 90% of Sigma, Delta's portion of Sigma's net income is: 
$828,000 ($920,000 x 90%) 
Therefore, Sigma's income is $572,800 ($828,000 x 90%).

REFERENCE: Ref.07_11 Delta Corporation Owns 90 Percent of Sigma Company,and Sigma Owns