Advanced Accounting 10th Edition by Thomas Schaefer, Joe Ben Hoyle, Timothy Doupnik

Exercise 41

Ace Company reports current earnings of $400,000 while paying $40,000 in cash dividends.Byrd Company earns $100,000 in net income and distributes $10,000 in dividends.Ace has held a 70 percent interest in Byrd for several years, an investment with an acquisition-date fair value equal to the book value of its underlying net assets.Ace uses the initial value method to account for these shares.
On January 1 of the current year, Byrd acquired in the open market $50,000 of Ace's 8 percent bonds.The bonds had originally been issued several years ago for 92, reflecting a 10 percent effective interest rate.On the date of purchase, the book value of the bonds payable was $48,300.Byrd paid $46,600 based on a 12 percent effective interest rate over the remaining life of the bonds.
What is consolidated net income for this year
a.$492,160.
b.$493,938.
c.$499,160.
d.$500,258.