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:

Overhead

The indirect costs or expenses associated with operating a business, including administrative, office, and rented space expenses.

Materials Ledger

A record of the quantity and value of materials on hand, received, and issued during a period.

Subsidiary Ledger

A detailed ledger that supplements a general ledger by providing detailed information for individual accounts, such as accounts payable or receivable.

Overapplied Overhead

A situation where the allocated manufacturing overhead cost for a period exceeds the actual overhead costs incurred, leading to a favorable variance.