The Following Is an Extract from the Non-Controlling Interest Memorandum,used

question 14

Multiple Choice

The following is an extract from the non-controlling interest memorandum,used to calculate non-controlling interests.Both subsidiaries became members of the economic entity at the same time at the start of this current period. $$\begin{array} { | l | r | r | r | } \hline & \text { Barbie Ltd } & \text { Ken Ltd } & \text { Total NCl } \\\hline \text { Non-controlling interest in profit after tax } & & & \\\text { Profit as shown in respective entity's reports } & 12000 & 16000 & \\\text { less: Dividend received from entity within group } & ( 2500 ) & & \\\text { Profit contributed to the economic entity } & 9500 & 16000 & \\\hline \text { Non-controlling interest } & 3800 & 9920 & 13720 \\\hline \begin{array} { l } \text { Non-controlling interest in opening retained earings } \\\text { Opening retained earnings }\end{array} & 15000 & 24000 & \\\hline \text { Non-controlling interest } & 6000 & 9600 & 15600 \\\hline\end{array}$$ The line item 'Dividend received from entity within the group' is an adjustment made:

• A)to prevent double-counting as the indirect non-controlling interest of Barbie Ltd is in fact the same interest as the direct non-controlling interest in Ken Ltd and would have already received a share of the dividend as part of the share of profit in Ken Ltd.
• B)to recognise, and eliminate, the dividend paid by Barbie Ltd directly to the parent entity.
• C)to prevent double-counting as the indirect non-controlling interest of Ken Ltd is in fact the same interest as the direct non-controlling interest in Barbie Ltd and would have already received a share of the dividend as part of the share of profit in Ken Ltd
• D)to recognise, and eliminate, the dividend paid by Ken Ltd directly to the parent entity.

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Definitions:

Management Rights

The prerogatives and authority granted to employers to operate and manage their business, including decisions about hiring, work assignments, processes, and disciplinary actions.

Double Taxation

The imposition of taxes on the same income, asset, or financial transaction at two different levels of government, such as both state and federal taxes on the same income.

Partnership

This is a juridically permitted structure for conducting business that necessitates the collaboration of two or more people in both the governance and profit distribution of the enterprise.

Share Control

The management or influence over the voting rights and other aspects of a company’s shares, often indicating power to make significant decisions.