On September 1, Year 2, Phillips, Inc., issued common stock in exchange for 20% of Sago, Inc.'s outstanding common stock. On July 1, Year 4, Phillips issued common stock for an additional 75% of Sago's outstanding common stock. Sago continues in existence as Phillips' subsidiary. How much of Sago's Year 4 net income should be reported as accruing to Phillips?

A) 20% of Sago's net income to June 30 and all of Sago's net income from July 1 to December 31
 
B) 20% of Sago's net income to June 30 and 95% of Sago's net income from July 1 to December 31
 
C) 95% of Sago's net income
 
D) All of Sago's net income

What's your answer & why??

Solution posted here tomorrow:
http://www.cpanet.com/cpa_forum/forum_posts.asp?TID=35586&am p;TPN=39