LaFevor Co. acquired 70% of the common stock of Dean Corp. on August 1, 2022. For 2022, Dean reported revenues of $960,000 and expenses of $780,000, all reflected evenly throughout the year. The annual amount of amortization related to this acquisition was $21,000.What is the effect of including Dean in consolidated net income for 2022?
A) $8,750.
B) $66,250.
C) $75,000.
D) $126,000.
E) $159,000.

Question

Quizplus · Accepted Answer

Dean's net income for 2022 is $180,000 ($960,000 - $780,000). LaFevor's share of Dean's net income is 70% x $180,000 = $126,000. However, the amortization related to the acquisition reduces LaFevor's consolidated net income by $21,000. Therefore, the effect of including Dean in consolidated net income for 2022 is $126,000 - $21,000 = $105,000.