**Question:**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)?**Options:**- ○ 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**Explanation:**The selected option is "As a deduction from consolidated net income." In a consolidated income statement using the acquisition method, the noncontrolling interest in a subsidiary is typically recorded as a deduction from the consolidated net income. This represents the portion of the net income that does not belong to the parent company but to the noncontrolling (minority) interest holders.

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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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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