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On January 1, 20X7, Marina Co. acquired 80% of the ordinary voting shares of Ships Inc. Both entities have a December 31 fiscal year end.
- On January 1, 20X7, Marina Co. acquired 80% of the ordinary voting shares of Ships Inc. Both entities have a December 31 fiscal year end. During 20X7, Marina paid $225,000 to Ships as management fees, and Ships loaned $144,000 to Marina.
Which of the following statements describes the impact on the consolidated Income Statement?
- $225,000 in management fees will be added to revenues as an adjustment on the consolidated Income Statement.
- Consolidated net income will be less than the sum of the parent and subsidiarys net income due to the intercompany transactions.
- Consolidated retained earnings attributable to the parent will be $180,000 higher than would be the case had the management fees not been charged.
- Consolidated expenses will be less than the sum of the parent and subsidiarys expenses due to the intercompany transactions.
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