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:

Purchasing Power

The ability of an individual or entity to buy goods and services, generally influenced by income and price levels.

Per Capita Income

A measure of the average income earned per person in a certain area in a specified year.