Akron Inc. owns 80 percent of the capital stock of Benson Company and 70 percent of the capital stock of Cashin Inc. Benson Company owns 15 percent of the capital stock of Cashin Inc. Cashin Inc., in turn, owns 25 percent of the capital stock of Akron Inc. These ownership interrelationships are illustrated in the following diagram:

Income from the separate operations of each corporation is as follows:

The following notations relate to items 1 through 4 . Ignore all income tax considerations.
\(A=\) Akron's consolidated net income; that is, its income plus its share of the consolidated net incomes of Benson and Cashin \(B=\) Benson's consolidated net income; that is, its income plus its share of the consolidated net income of Cashin \(C=\) Cashin's consolidated net income; that is, its income plus its share of the consolidated net income of Akron Select the correct answer for each of the following questions.
1. The equation, in a set of simultaneous equations, that computes \(A\) is:

a. \(A=.75(\$ 190,000+.8 B+.7 C)\).

b. \(A=\$ 190,000+.8 B+.7 C\).

c. \(A=.75(\$ 190,000)+.8(\$ 170,000)+.7(\$ 230,000)\).

d. \(A=.75(\$ 190,000)+.8 B+.7 C\).
2. The equation, in a set of simultaneous equations, that computes \(B\) is:

a. \(B=\$ 170,000+.15 C-.75 A\).

b. \(B=\$ 170,000+.15 C\).

c. \(B=.2(\$ 170,000)+.15(\$ 230,000)\).

d. \(B=.2(\$ 170,000)+.15 C\).
3. Cashin's noncontrolling interest in consolidated net income is:

a. \(15(\$ 230,000)\).

b. \(\$ 230,000+.25 A\).

c. \(15(\$ 230,000)+.25 A\).

d. . 15 C.
4. Benson's noncontrolling interest in consolidated net income is:

a. \(\$ 25,500\).

b. \(\$ 30,675\).

c. \(\$ 34,316\).

d. \(\$ 45,755\).

Transcribed Image Text:

Benson .80 Akron .15 .70 25 25 Cashin