Pepper owns 70% of Spray. Where is the noncontrolling interest in Spray's positive net income reported on the consolidated income statement (under the acquisition method)?As an addition to consolidated net incomeAs a deduction from consolidated net incomeAs an addition to Spray's dividendsAs a deduction from Spray's dividends

Answered: Pepper owns 70% of Spray. Where is the…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Pepper owns 70% of Spray. Where is the noncontrolling interest in Spray's positive net income reported on the consolidated income statement (under the acquisition method)?
As an addition to consolidated net income
As a deduction from consolidated net income
As an addition to Spray's dividends
As a deduction from Spray's dividends

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Solution

Correct answer is

As a deduction from consolidated net income

Under the acquisition method the non-controlling interest is created for the proportionate income that does not belong to pepper and deducted from the net income reported on the consolidated income statement

The format is as

Under acquisition method

Revenue	XXX
Expense	XXX
Operating income	XXX
Non-controlling interest	(XXX)
Net income	XXX

Hence Correct answer is As a deduction from consolidated net income

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