In Order to Consolidate a 60% Interest in a Subsidiary

question 21

Multiple Choice

In order to consolidate a 60% interest in a subsidiary, the Morgan Group prepared the following pre-acquisition entry: DR Retained earnings $14 000
DR Share capital $25 000
DR General reserve $6 000
CR Investment in subsidiary $45 000
The interest in equity attributable to the direct non-controlling interest is:

• A) $30 000.
• B) $15 000.
• C) $25 000.
• D) $20 000.

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Definitions:

Fixed Component

The portion of a cost or expense that remains constant regardless of the level of production or business activity.

Predetermined Overhead Rate

An estimated rate used to allocate manufacturing overhead costs to individual products or job orders, based on a chosen activity base.

Variable Component

A portion of a cost or expense that varies directly with the level of activity or production volume.

Fixed Component

The portion of total costs that remains constant regardless of the level of activity or output.