Ace Company reports current earnings of $400,000 while paying $40,000 in cash dividends. Byrd Company earns $100,000
Question:
Ace Company reports current earnings of $400,000 while paying $40,000 in cash dividends. Byrd Company earns $100,000 in net income and distributes $10,000 in dividends. Ace has held a 70 percent interest in Byrd for several years, an investment with an acquisition-date fair value equal to the book value of its underlying net assets. Ace uses the initial value method to account for these shares.
On January 1 of the current year, Byrd acquired in the open market $50,000 ofAce’s 8 percent bonds. The bonds had originally been issued several years ago for 92, reflecting a 10 percent effective interest rate. On the date of purchase, the book value of the bonds payable was $48,300. Byrd paid $46,600 based on a 12 percent effective interest rate over the remaining life of the bonds. LO4 What is consolidated net income for this year?
a. $492,160.
b. $493,938.
c. $499,160.
d. $500,258.
Step by Step Answer:
Advanced Accounting
ISBN: 9780073379456
9th Edition
Authors: Joe Ben Hoyle, Timothy S. Doupnik, Thomas F. Schaefer, Oe Ben Hoyle