The Following Information Pertains to the Shareholdings of an Affiliated

question 38

Multiple Choice

The following information pertains to the shareholdings of an affiliated group of companies. The respective ownership interest of each company is outlined below. A Inc.:
A Inc. owns 75% of J Inc. and 60% of G Inc.
J Inc.:
J Inc. owns 60% of D Inc. and 20% of G Inc.
G Inc.:
G Inc. owns 10% of D Inc. and 80% of Y Inc.
All intercompany investments are accounted for using the equity method.
The Net Incomes for these companies for the year ended December 31, 2020 were as follows:
$$\begin{array} { | l | r | } \hline \text { A Inc. } & \$ 1,000,000 \\\hline \text { J Inc. } & \$ 200,000 \\\hline \text { G Inc. } & \$ 600,000 \\\hline \text { D Inc. } & \$ 300,000 \\\hline \text { Y Inc. } & \$ 100,000 \\\hline\end{array}$$ Unrealized intercompany profits (pre-tax) earned by the various companies for the year ended December 31, 2020 are shown below:
$$\begin{array} { | l | l | } \hline G \text { Inc. } & \$ 10,000 \\\hline Y \text { Inc. } & \$ 10,000 \\\hline J\text { Inc. } & \$ 20,000 \\\hline\end{array}$$ All companies are subject to a 25% tax rate.
What is the Consolidated Net Income for the year attributable to the shareholders of A Inc.?

• A) $1,510,000
• B) $1,796,125
• C) $1,817,500
• D) $2,170,000

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Definitions:

Explicit

Stated clearly and in detail, leaving no room for confusion or doubt.

Prejudiced

Holding preconceived judgments or opinions about people or groups without sufficient knowledge or experience.

Discrimination

Unjust or prejudicial treatment of different categories of people, especially on the grounds of race, age, or gender.

Traffic Stops

Interactions initiated by law enforcement officers with motorists on public roads, usually due to suspected violations of traffic laws.