Question

Explain why the answer is B.

Brady, Inc., a calendar-year corporation, acquires 85% of Austin Company on September 1, 2019, and an additional 10% on January 1, 2020. Total annual amortization of $8,000 relates to the first acquisition. Austin reports the following figures for 2020: Revenues $ 550,000 Expenses 425,000 Retained earnings, 1/1/20 300,000 Dividends paid 55,000 Common stock 200,000 Without regard for this investment, Brady independently earns $375,000 in net income during 2020.All net income is earned evenly throughout the year.What is the controlling interest in consolidated net income for 2020?

A) $464,250. B) $474,450. C) $481,250. D) $492,000. E) $500,000.

Answer: B

Answer 1

Correct of option b : $474,450

Explanation

Particular and Explanation	Amount
Revenues	$ 550,000
Expenses	$425,000
Total annual amortization	$8,000
Net income $ 550,000 - $425,000 - $8,000 = $117,000	$117,000
acquires shares	85%
Controlling interest share income $117,000 x 85%	$99450
Brady net income	$375,000
controlling interest in consolidated net income for 2020 $99450 + $375,000 = $474,450	$474,450

Correct of option b : $474,450

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