C. is the wrong answer. Can anyone help me out? A Parent Company owns 100% of it

Question

C. is the wrong answer. Can anyone help me out?

A Parent Company owns 100% of its subsidiary. During 2016, the Parent company reports net income (by itself, without any investment income from its Subsidiary) of $1,500,000 and the subsidiary reports net income of $700,000. The Parent had a bond payable outstanding on July 1, 2015, with a carry value equal to $930,000. The Subsidiary acquired the bond on July 1, 2015 for $860,000. During 2016, the Parent reported interest expense (related to the bond) of $80,000 while the Subsidiary reported interest income (related to the bond) of $75,000 What is consolidated net income for the year ended December 31, 2016? Select one: A. $2,205,000 B. $2,270,000 O C.$2,200,000 OD. $2,275,000

Explanation / Answer

Parent company Income = 1500,000

Subsidairy Income = 700,000

Consolidated Income = 1500,000 + 700,000 + 5000 = 2205,000 ................ Option - A

cancellation of excess of Interest expenses over Income = 80000 - 75000 = 5000

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