Hardford Corp. held 80% of Inglestone Inc. which, in turn, owned 80% of Jade Co. Operating income figures (without investment income) as well as unrealized upstream gains included in the income for the current year follow:
-The accrual-based income of Jade Co. is calculated to be

Question

Hardford Corp. held 80% of Inglestone Inc. which, in turn, owned 80% of Jade Co. Operating income figures (without investment income) as well as unrealized upstream gains included in the income for the current year follow: 
-The accrual-based income of Jade Co. is calculated to be

Quizplus · Accepted Answer

To calculate the accrual-based income of Jade Co., we need to start with the operating income figure of Jade Co. which is $240,000. Then, we need to subtract the share of operating income of Inglestone Inc. which is 20% of $120,000, or $24,000. This leaves us with $216,000 as the operating income of Jade Co. that is attributable to Hartford Corp. Finally, we need to subtract the share of operating income of Hartford Corp. which is 20% of $216,000, or $43,200. This gives us $172,800 as the accrual-based income of Jade Co. However, we also need to add the unrealized upstream gain of $23,200 which is included in the income figure of Inglestone Inc. but ultimately attributable to Jade Co. Therefore, the final accrual-based income of Jade Co. is $196,000 (i.e. $172,800 + $23,200).