Frey Ltd Acquired 70% of Sabo Ltd

question 1

Multiple Choice

Frey Ltd. acquired 70% of Sabo Ltd. in 20X4. On January 1, 20X8, Frey acquired another 10% of Sabo's common shares for $250,000.
- Under the parent-company extension method, the balance of the non-controlling interest at December 31, 20X7, was $600,000. What adjustment should be made to the consolidated shareholders' equity to reflect Frey's additional purchase of shares?

• A)$50,000
• B)$66,667
• C)$200,000
• D)$250,000

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Definitions:

Unit Variable Expenses

Costs that vary directly with the level of production or sales volume, calculated on a per unit basis.

Fixed Expenses

Costs that do not fluctuate with changes in production level or sales volume, such as rent and salaries.

Absorption Costing

A method of costing that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed manufacturing overhead in the cost of a product.

Net Operating Income

The total operating profit of a company after all operating expenses, excluding taxes and interest expenses, have been deducted from total revenue.