Calculating Consolidated Net Income On 1/1/06, Palmer Inc. acquired 75% of Snead Inc.’s out¬

standing common stock at an amount equal to 75% of Snead’s net assets at carrying value. Each company’s 2006 income statement, exclusive of earnings recorded under the equity method, fol¬ lows:

Palmer Snead Sales . $ 800,000 $ 200,000 Cost of sales . (400,000) (100,000)

Expenses . (150,000) (40,000)

Net Income . $ 250,000 $ 60,000 Balance sheet amounts for each company at 12/31/06 are purposely not furnished; therefore, a for¬

mal consolidation worksheet cannot be prepared. The consolidated amounts still can be deter¬

mined, however, if you understand the main concept of the chapter.

Required 1. Determine the consolidated income statement amounts.

2. Determine the consolidated income statement amounts assuming that Palmer had excess cost and amortized from its Investment account (under the equity method) $3,000 of cost that per¬

tains to intangible assets other than goodwill.