Please try to get the correct answer Question 7 (7 points) Big Company acquires
ID: 2515296 • Letter: P
Question
Please try to get the correct answer
Question 7 (7 points) Big Company acquires 90 percent of Little Company on January 1, Year One. On that date, Little has unpatented technology that has not previously been recorded but is worth $100,000. It should have a life of five years. In addition, goodwill of $40,000 is recognized. By the end of Year One, Little reports net income for the period of S300,000. What amount should be recognized on the Year One financial statements as the noncontrolling interest in the net income of Little? Question 7 options: C A) Zero B) S27,900 C) S28,000 D) S30,000Explanation / Answer
The non-controlling interest is 10% as 90% of Little is held by Big Company. While recognising the net income for non controlling interest, no adjustements against the Patents or Goodwill are to be made as they are balance sheet items.
Hence, the unpatented technology and the Goodwill bears no effect in making the decision for accounting non-controlling income.
The correct answer is $ 30,000 (10% non-controlling interest * $ 3,00,000)
NOTE:(Just for Knowledge )
The unpatented technology is recorded seperately from the Goodwill while preparing Consolidated Balance Sheet as there are no contractual rights attached to the unpatented technlogy.