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.

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Definitions:

Call Increases

Typically refers to an increase in the price of call options, which are contracts that give the holder the right to buy the underlying asset at a specified price.

Wasting Asset

An asset that inexorably declines in value over time due to physical deterioration or the expiration of intangible rights.

Put Option

An option that gives the owner the right, but not the obligation, to sell an asset.

Call Option

An option that gives the owner the right, but not the obligation, to buy an asset.