If a Parent Company Borrows Money at an Interest Rate

question 24

Multiple Choice

If a parent company borrows money at an interest rate of six percent from its subsidiary, what effect (if any) will this have on the non-controlling interest?

• A) This would have no effect on the non-controlling interest.
• B) The subsidiary would book its pro-rata share of any interest revenue.
• C) The non-controlling interest balance would be reduced by the amount of the loan.
• D) The subsidiary would record any interest revenue as an extraordinary gain.

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Definitions:

Metacognition

The recognition and comprehension of an individual's cognitive processes, commonly known as "metacognition."

Interpersonal Intelligence

A type of intelligence that involves the ability to understand and interact effectively with others.

Contextual Intelligence

The ability to understand and appropriately apply knowledge taking into account the situational context, including cultural and environmental factors.

Mnemonics

Memory aids, especially those techniques that use vivid imagery and organizational strategies to enhance recall.