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:

MC > MR

A condition where the marginal cost of producing an additional unit is greater than the marginal revenue gained from selling it, indicating it’s not profitable to increase production.

Profit Maximized

The point at which a firm achieves the highest possible profit, typically by adjusting output levels or prices.

Total Revenue

The total amount of money that is brought in by sales of goods or services.

Total Cost

The complete cost of production, encompassing both fixed and variable costs.