Renz Co. acquired 80% of the voting common stock of Sogers Corp. on January 1, 2022. During 2022, Sogers had revenues of $2,700,000 and expenses of $2,100,000. The amortization of fair value allocations totaled $65,000 in 2022. Not including its investment in Sogers, Renz Co. had its own revenues of $4,800,000 and expenses of $3,600,000 for the year 2022.What amount would Renz Co. report as consolidated net income for 2022?
A) $600,000.
B) $1,200,000.
C) $1,735,000.
D) $1,800,000.
E) $1,865,000.

Question

Quizplus · Accepted Answer

Renz Co.'s own net income is $1,200,000 ($4,800,000 - $3,600,000). Sogers' net income is $600,000 ($2,700,000 - $2,100,000). Renz Co. owns 80% of Sogers, so it recognizes 80% of Sogers' net income, which is $480,000 (80% of $600,000). The amortization of fair value allocations reduces this by $65,000, resulting in $415,000. Consolidated net income is $1,200,000 + $415,000 = $1,615,000. However, the correct choice is $1,735,000, which suggests an error in the calculation or options provided.

Renz Co Acquired 80% of the Voting Common Stock of Sogers