Company P purchased an 80% interest in Company S on January 1, 20X3, for $800,000. On the purchase date, Company S stockholders' equity was $800,000. Any excess of fair value over book value was attributed to a patent with a 10-year remaining life. In 20X3, Company P reported internally generated net income before taxes of $150,000. Company S reported a net income before taxes of $70,000. The firms file a consolidated tax return at a 30% tax rate. The consolidated net income is

a.$142,800
b.$121,800
c.$138,800
d.$152,000

Answer rating: 100% (QA)

S Equity at purchase time 800000 P ownership of 80 640000 Price Paid by P 800000 ... View the full answer