Consolidated Net Income Using the Equity Method for an Acquisition

question 55

Multiple Choice

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

• A) Parent company's income from its own operations plus the equity from subsidiary's income recorded by the parent.
• B) Parent's reported net income.
• C) Combined revenues less combined expenses less equity in subsidiary's income 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 income recorded by parent.
• E) All of the above.

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Definitions:

Projects

Specific tasks or initiatives undertaken to achieve a particular goal, often requiring a significant amount of planning and work.

IRR Cross-Over Rate

The rate at which two projects have the same net present value (NPV) when considering their internal rate of return (IRR), used to choose between competing projects.

Annual Cash Flow

The total amount of money being transferred into and out of a business, measured yearly.

Initial Cost

The acquisition cost of an asset or investment, which might include the purchase price and any other expenses necessary to get the asset ready for use.