Keefe,Inc. ,a calendar-year corporation,acquires 70% of George Company on September 1,2009 and an additional 10% on April 1,2010.Total annual amortization of $6,000 relates to the first acquisition.George reports the following figures for 2010:
Without regard for this investment,Keefe earns $300,000 in net income during 2010.
All net income is earned evenly throughout the year.
What is the controlling interest in consolidated net income for 2010?

Question

Keefe,Inc. ,a calendar-year corporation,acquires 70% of George Company on September 1,2009 and an additional 10% on April 1,2010.Total annual amortization of $6,000 relates to the first acquisition.George reports the following figures for 2010: 
Without regard for this investment,Keefe earns $300,000 in net income during 2010.
All net income is earned evenly throughout the year.
What is the controlling interest in consolidated net income for 2010?

Quizplus · Accepted Answer

To calculate the controlling interest in consolidated net income, we need to first calculate the income attributable to Keefe's ownership percentage in George Company.

- For the period from September 1, 2009 to December 31, 2009, Keefe owns 70% of George Company and therefore 70% of its income. George reports $60,000 in net income for this period, so Keefe's share is $42,000.
- For the period from January 1, 2010 to March 31, 2010, Keefe owns 70% of George Company and 80% of its income (70% from ownership + 10% from the amortization of the initial acquisition). George reports $20,000 in net income for this period, so Keefe's share is $14,000.
- For the period from April 1, 2010 to December 31, 2010, Keefe owns 80% of George Company and therefore 80% of its income. George reports $40,000 in net income for this period, so Keefe's share is $32,000.

Therefore, Keefe's total share of consolidated net income is $88,000 ($42,000 + $14,000 + $32,000).

Adding Keefe's net income of $300,000 to its share of consolidated net income gives a total consolidated net income of $388,000.

The controlling interest in consolidated net income is then calculated by subtracting Keefe's share of net income from the total consolidated net income:

$388,000 - $88,150 = $372,850

Therefore, the correct answer is B) $372,850.

Keefe,Inc ,A Calendar-Year Corporation,acquires 70% of George Company on September