If Watkins pays $450,000 in cash for Glen, and Glen earns $50,000 in net income and pays $20,000 in dividends during 2017, what amount representing Glen would be reflected in consolidated net income for the year ended December 31, 2017?
A) $20,000 under the initial value method.
B) $30,000 under the partial equity method.
C) $50,000 under the partial equity method.
D) $44,500 under the equity method.
E) $45,500 regardless of the internal accounting method used.

Question

Quizplus · Accepted Answer

The consolidated net income reflects the parent's share of the subsidiary's net income, which is $50,000 - $20,000 = $30,000. However, since dividends do not affect consolidated net income, the full $50,000 of Glen's net income is included, regardless of the internal accounting method used.

If Watkins Pays $450,000 in Cash for Glen, and Glen