P Company owns 80% of the outstanding common stock of S Company. S Company owns 10% of the outstanding common stock of P Company. For 2006, P Company had net income of $400,000 from its own separate operations, exclusive of earnings on its investment in S Company. For 2006, S Company had net income of $100,000 from its own separate operations, exclusive of earnings on its investment in P Company.
Required:
a. Determine the consolidated net income for 2006 that accrues to the controlling interest under the treasury stock method.
b. Determine the consolidated net income for 2006 under the traditional allocation method and the amount of earnings accruing to the controlling interest.

Question

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The Answer of P Company owns 80% of the outstanding common stock of S Company. S Company owns 10% of the outstanding common stock of P Company. For 2006, P Company had net income of $400,000 from its own separate operations, exclusive of earnings on its investment in S Company. For 2006, S Company had net income of $100,000 from its own separate operations, exclusive of earnings on its investment in P Company.
Required:
a. Determine the consolidated net income for 2006 that accrues to the controlling interest under the treasury stock method.
b. Determine the consolidated net income for 2006 under the traditional allocation method and the amount of earnings accruing to the controlling interest.

P Company Owns 80% of the Outstanding Common Stock of S