Question 1

Parent Co. owns 80% of Sub Co. Sub Co. reported Net Income of $100,000 and paid dividends of $20,000. There is no preferred stock. What amount of Net Income is attributable to the Noncontrolling Interest (NCI)?

Accepted Answer

NCI Income = Sub's Net Income * NCI Percentage. Dividends do not affect the calculation of NCI Income (they affect NCI Balance on Balance Sheet).

Question 2

What mistakes do candidates make on this CPA question?

Accepted Answer

Subtracting dividends before calculating share; calculating the balance sheet change instead of income.

Parent Co. owns 80% of Sub Co. Sub Co. reported Net Income of $100,000 and paid dividends of $20,000. There is no preferred stock. What amount of Net Income is attributable to the Noncontrolling Interest (NCI)?

How to approach this question

Full Answer

Common mistakes

Practice the full CPA FAR Practice Exam 4

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