Hi,

I know the answer to the problem is "B" but i need help figuring out how to arrive at the answer. The problem is:

Royce Co. acquired 60% of Park Co. for $420,000 when Park's book value was $560,000.On that date, Park had equipment (with a ten-year life) that was undervalued in the financial records by $84,000.Any goodwill was to be amortized over twenty years.Two years later, the following figures were reported by the two companies (stockholders' equity accounts have been omitted).

Royce Co.

Park Co.

Book

Book

Market

Value

Value

Value

Current assets

$868,000

$420,000

$448,000

Equipment

364,000

280,000

392,000

Buildings

574,000

210,000

210,000

Liabilities

(546,000)

( 168,000)

( 168,000)

Revenues

( 1,260,000)

( 560,000)

Expenses

700,000

420,000

Investment income

Not Given

18.What is consolidated net income?

A)$692,280

B)$636,280

C)$638,960

D)$616,000

E)$560,000