Ayer Company’s books show current earnings of $430,000 and $46,000 in cash dividends. Zane Company earns $164,000 in net income and declares $11,500 in dividends. Ayer has held a 70 percent interest in Zane for several years, an investment with an acquisition-date excess fair over book value attributable solely to indefinite-lived trademarks. Ayer uses the initial value method to account for these shares and includes dividend income in its internal earnings reports.

On January 1 of the current year, Zane acquired in the open market $64,400 of Ayer’s 8 percent bonds. The bonds had originally been issued several years ago at 92, reflecting a 10 percent effective interest rate. On the date of purchase, the carrying amount of the bonds payable was $60,200. Zane paid $56,000 based on a 12 percent effective interest rate over the remaining life of the bonds.

What is consolidated net income for this year?
a. $598,900
b. $589,450
c. $438,050
d. $590,850