On January 1,2011, Phoenix Co. acquired 100 percent of the outstanding voting shares of Sedona Inc. for $600,000 cash. At January 1,2011, Sedona’s net assets had a total carrying amount of $420,000. Equipment (eight-year remaining life) was undervalued on Sedona’s financial records by $80,000. Any remaining excess fair over book value was attributed to a customer list developed by Sedona (four-year remaining life), but not recorded on its books. Phoenix applies the equity method to account for its investment in Sedona. Each year since the acquisition, Sedona has paid a $20,000 dividend. Sedona recorded income of $70,000 in 2011 and $80,000 in 2012.
Selected account balances from the two companies’ individual records were as follows:
| Phoenix | Sedona |
2013 Revenues $498,000 | $498,000 | $285,000 |
2013 Expenses | 350,000 | 195,000 |
2013Income from Sedona | 55,000 |
|
Retained earnings | 250,000 | 175,000 |
What is consolidated net income for Phoenix and Sedona for 2013?
a. $148,000
b. $203,000
c. $228,000
d. $238,000
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