Able Company owns an 80% interest in Barns Company and a 20% interest in Carns Company. Barns owns a 40% interest in Carns Company.
A) Carn will not be included in the consolidation process
B) Carn will be included in the consolidation process; 20% of prior period amortizations will be distributed to Retained Earnings-Carn
C) Carn will be included in the consolidation process; 40% of prior period amortizations will be distributed to Retained Earnings-Carn
D) Carn will be included in the consolidation process; NCI will be allocated 6.4% of prior-period profits originated by Carn

Question

Quizplus · Accepted Answer

Since Able Company owns an 80% interest in Barns Company and Barns Company owns a 40% interest in Carns Company, Able Company indirectly owns a 32% interest in Carns Company (80% ownership in Barns x 40% ownership in Carns). Therefore, Able Company consolidates Barns Company and its 40% interest in Carns Company. As part of the consolidation process, 40% of prior period amortizations will be distributed to Retained Earnings-Carn.

Able Company Owns an 80% Interest in Barns Company and a 20