Question

A parent owns less than 100% of the voting stock of its subsidiary. On its consolidated income statement, earnings per share is calculated using which of the amounts in the numerator?

Answer 1

On its consolidated income statement, earnings per share is calculated using the net income attributable to the parent company in the numerator.

Step-by-step explanation:

On its consolidated income statement, earnings per share is calculated using the net income attributable to the parent company in the numerator. This means that the earnings per share figure includes only the portion of the net income that belongs to the parent company, not the subsidiary.

For example, if the parent company owns 80% of the voting stock of its subsidiary, it would include 80% of the subsidiary's net income in the consolidated income statement. Earnings per share is then calculated by dividing the net income attributable to the parent company by the total number of shares outstanding.

It's important to note that only the portion of the net income attributable to the parent company is used in the calculation, as this reflects the ownership interest of the parent company in the subsidiary.