ExpertEasy1 markMultiple Choice
CPA · Question 15 · Area I: Financial Reporting
Parent Co. owns 80% of Sub Co. Sub Co. reported Net Income of $100,000 and paid dividends of $20,000. There is no preferred stock. What amount of Net Income is attributable to the Noncontrolling Interest (NCI)?
Parent Co. owns 80% of Sub Co. Sub Co. reported Net Income of $100,000 and paid dividends of $20,000. There is no preferred stock. What amount of Net Income is attributable to the Noncontrolling Interest (NCI)?
Answer options:
A.
$16,000
B.
$20,000
C.
$80,000
D.
$4,000
How to approach this question
NCI Income = Sub's Net Income * NCI Percentage. Dividends do not affect the calculation of NCI Income (they affect NCI Balance on Balance Sheet).
Full Answer
B.$20,000✓ Correct
B
NCI Percentage = 100% - 80% = 20%.<br/>NCI in Net Income = Sub's NI * 20% = $100,000 * 0.20 = $20,000.
Common mistakes
Subtracting dividends before calculating share; calculating the balance sheet change instead of income.
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