Revenue & Net income calculation in Equity and Consolidation 150, 300, investment, acquired, company

andytrader

If company P acquired 50% of company C, how are Revenue & NI calculation done under Equity method and Consolidation method on the acquisition date? (say on the acquisition/investment date, P itself has Rev $500, and NI $100, and C has Rev $300 and NI $50)
My way would be:
Equity method: 500+50%*300 =650 (REV) and 100+50*50% = 125 (NI);
Consolidation method: 500+300 = 800 (REV) and 100+50=150 (NI)
I know I am wrong at some of these calculations, for example, Schweser says “NI is the same under these methods”. I’m mainly using the textbook, would love to see some evidence/quote from the textbook if anyone can help me point out - I didn’t find any.
Thanks!

jcole21

Equity method: Rev = 500, NI = 125
Consolidation, Rev = 800, Exp = 400 + 250 = 650, Minority Int = 25, NI = 800-650-25=125

johnnyBuz

Hello,
Just wanted to add that equity method doesn’t merge anything.. that is, we don’t ‘consolidate’ the revenues, liabilities, expenses etc. its just 1 line.

cfalevel2011

Thanks bbcman, you are right.
Now, the way I memorize how equity method works is that it does not do much on the IS (except for the inclusion of porportional share of investee’s NI), but mostly on BS, i.e. the investment account (increases by the amount of the porportional NI from the investee, decreases by the amount of dividends received).