A Parent Company Regularly Sells Merchandise to Its 70%-Owned Subsidiary

question 23

Multiple Choice

A parent company regularly sells merchandise to its 70%-owned subsidiary.Which of the following statements describes the computation of noncontrolling interest share?

• A)The subsidiary's net income times 30%
• B)(The subsidiary's net income × 30%)+ unrealized profits in the beginning inventory - unrealized profits in the ending inventory
• C)(The subsidiary's net income + unrealized profits in the beginning inventory - unrealized profits in the ending inventory)× 30%
• D)(The subsidiary's net income + unrealized profits in the ending inventory - unrealized profits in the beginning inventory)× 30%

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Definitions:

Trucking

Refers to the transportation of goods and products by large vehicles over land.

Conglomerate Merger

A combination of two companies that are involved in totally unrelated business activities.

Marketing Chain

The series of processes and activities involved in moving a product from producer to consumer, including distribution and selling.

Vertical Merger

A merger between companies in the same industry but at different stages of the production process, such as a manufacturer merging with a supplier.