Question

Dane, Inc., owns Carlton Corporation. For the current year, Dane reports net income (without consideration of its investment in Carlton) of $216,000 and the subsidiary reports $98,500. The parent had a bond payable outstanding on January 1, with a carrying amount of $230,000. The subsidiary acquired the bond on that date for $208,500. During the current year, Dane reported interest expense of $23,760 while Carlton reported interest income of $22,860, both related to the intra-entity bond payable. What is consolidated net income?

Answer 1

Answer:

The consolidated net income is $ 336,900.

Explanation:

Dane’s income from own operations = $216,000

Carlton’s income = $98,500

Eliminate intra-entity interest income = $(22,860)

Eliminate intra-entity interest expense = $23,760

Recognize retirement gain on debt = $230,000 - $208,500

                                                           = $21,500

Consolidated net income = $216,000 + $98,500 - $22,860 + $23,760 + $21,500  =  $ 336,900

Therefore, The consolidated net income is $ 336,900.