An 80%-owned subsidiary sells merchandise to its parent at a markup of 25% on cost. During the current year, the parent paid $725,000 for merchandise received from the subsidiary. By year-end, the parent has sold $600,000 of the merchandise to outside customers for $900,000, but still holds the other $125,000 in its ending inventory. What is the impact of the above information on noncontrolling interest in net income, reported on the consolidated income statement for the year? A. Subtract $25,000 B. No effect C. Subtract $20,000 D. Subtract $5,000

Question

Myles Bates

Business

25 September, 22:39

An 80%-owned subsidiary sells merchandise to its parent at a markup of 25% on cost. During the current year, the parent paid $725,000 for merchandise received from the subsidiary. By year-end, the parent has sold $600,000 of the merchandise to outside customers for $900,000, but still holds the other $125,000 in its ending inventory. What is the impact of the above information on noncontrolling interest in net income, reported on the consolidated income statement for the year? A. Subtract $25,000 B. No effect C. Subtract $20,000 D. Subtract $5,000

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Rosemary · Answer 1

B no effect

Explanation:

Because given transaction will have no impact on noncontrolling interest in net income, reported on the consolidated 2018 income statement. The markup will affect only the parent company's share in the net income reported on the consolidated 2018 income statement.