Interesting Intercorporate Investments Question parent, income, investment

HuskyGrad2010

The parent owns 60% of the subsidiary.

The subsidiary's net income is 65.

Question:

The incremental effect on the parent's net income from its investment in the subsidiary is: ?

A) 39

B) 45

C) 65



Edited 1 time(s). Last edit at Monday, April 26, 2010 at 11:53AM by CFA.Rhythm.

WarrenB1

39:

40% to the minority interest, 60% to the parent

redskins44

that is exactly correct. nice work.

senlinlang

I thought this was a trick Q somehow as well, I read every word very carefully and still expected to get it wrong somehow. I wish all CFAI Q's were like this - very straight to the point.

tarunajwani

no tricks, not really.

I know for myself, when I see consolidation method I usually consolidate revenues and expenses, but now I know that I have to subtract the minority interest from net income

sameeragarwal

yes...just remember net income is the bottom line for the I/S