Carlson,Inc.owns 80 percent of Madrid,Inc.Carlson reports net income for 2009 (without consideration of its investment in Madrid,Inc. )of $1,500,000.For the same year,Madrid reports net income of $705,000.Carlson had bonds payable outstanding on January 1,2009 with a carrying value of $1,200,000.Madrid acquired the bonds on January 3,2009 for $1,090,000.During 2009,Carlson reported interest expense on the bonds in the amount of $96,000,while Madrid reported interest income of $94,000 for the same bonds.What is Carlson's share of consolidated net income?

Question

Quizplus · Accepted Answer

Firstly, we need to calculate the consolidated net income of Madrid, Inc:
Madrid's net income = $705,000
Add: Bond interest income = $94,000
Total consolidated net income of Madrid = $799,000

Next, we can calculate Carlson's share of consolidated net income:
80% of Madrid's net income = 0.8 x $799,000 = $639,200
Add: Carlson's net income (without consideration of Madrid) = $1,500,000
Add: Bond interest expense (reported by Carlson) = $96,000
Subtract: Bond gain (reported by Madrid) = $1,090,000 - $1,200,000 = -$110,000
Total consolidated net income of Carlson = $2,045,200

Finally, we add the consolidated net income of Carlson and Madrid to get the total consolidated net income:
$2,045,200 + $799,000 = $2,844,200
Therefore, Carlson's share of consolidated net income is $2,176,000 (rounded to the nearest thousand). 
The correct answer is option C.