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:

Monthly Dollar Sales

The total sales revenue earned by a business within a month, measured in dollars.

Variable Expenses

Costs that change in proportion to the activity of a business, such as sales or production levels.

Fixed Expenses

Costs that do not change in total despite fluctuations in the volume of goods or services produced or sold.

Annual Sales

The total revenue generated from the sale of goods or services in one fiscal year.