Consolidated Net Income Using the Equity Method for an Acquisition

question 66

Multiple Choice

Consolidated net income using the equity method for an acquisition combination is computed as follows:

• A) Parent company's revenues from its own operations plus subsidiary retained earnings.
• B) Parent's reported net income plus subsidiary dividends.
• C) Combined revenues less combined expenses less equity in subsidiary's earnings less amortization of fair-value allocations in excess of book value.
• D) Parent's revenues less expenses for its own operations plus the equity from subsidiary's earnings less subsidiary dividends.
• E) None of these answer choices are correct.

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Definitions:

Comprehensive Income

Represents the total change in equity for a business entity not resulting from transactions with owners, including all revenues, gains, expenses, and losses.

Net Fixed Assets

The value of a company’s property, plant, and equipment minus any accumulated depreciation, indicating the tangible assets' net book value.

Liquid Asset

Assets that can be quickly and easily converted into cash without significant loss of value, including cash itself, marketable securities, and accounts receivable.

Cash Flow From Assets

The total amount of cash generated by a company’s business operations after accounting for capital expenditures and additions to net working capital.