A Parent Acquires 70% of a Subsidiary's Common Stock and 60

question 49

Multiple Choice

A parent acquires 70% of a subsidiary's common stock and 60 percent of its preferred stock. The preferred stock is noncumulative. The current year's dividend was paid. How is the non-controlling interest in the subsidiary's net income assigned?

• A) Income is assigned as 40 percent of the value of the preferred stock, based on an allocation between common stock and preferred stock and their relative par values.
• B) There is no allocation to the non-controlling interest because there are no dividends in arrears.
• C) Income is assigned as 40 percent of the preferred stock dividends.
• D) Income is assigned as 40 percent of the preferred stock dividends plus 30% of the subsidiary's income after subtracting all preferred stock dividends.
• E) Income is assigned as 30 percent of the subsidiary's income after subtracting 60% of preferred stock dividends.

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Definitions:

Insurance Policy

A contract between an individual or entity and an insurance company, detailing the terms for payment of premiums and the provisions of coverage.

Adjusting Entries

Journal entries made at the end of an accounting period to update certain accounts and ensure they reflect the true financial position of a company.

Adjusting Entries

These are journal entries made in the accounts to adjust revenues and expenses to the period in which they actually occurred, ensuring that financial statements reflect accurate figures.

Estimated Items

Financial statement items that require a degree of estimation by management to determine the appropriate values to record.