In the Year an 80% Owned Subsidiary Sells Equipment to Its

question 16

Multiple Choice

In the year an 80% owned subsidiary sells equipment to its parent company at a gain, the noncontrolling interest in consolidated income is calculated by multiplying the noncontrolling interest percentage by the subsidiary's reported net income:

• A) plus the intercompany gain considered realized in the current period.
• B) plus the net amount of unrealized gain on the intercompany sale.
• C) minus the net amount of unrealized gain on the intercompany sale.
• D) minus the intercompany gain considered realized in the current period.

---

Definitions:

Perfectly Competitive Markets

Markets in which no individual buyer or seller has any significant impact on prices and products are perfect substitutes.

Minimum ATC

The lowest point on the Average Total Cost curve, indicating the most efficient scale of production for a firm in the long run.

Economic Profit

Profits earned by a firm or an individual after subtracting both the explicit costs and opportunity costs of resources employed.

Short Run

A time period in which at least one factor of production is fixed and cannot be changed, contrasting with the long run where all factors are variable.