_____ Which of the following methods reports the NCI in the subsidiary's net income as a deduction in arriving at consolidated net income in the consolidated income statement?
A) The parent company concept.
B) The economic unit concept.
C) Proportional consolidation.
D) None of the above.

Question

Quizplus · Accepted Answer

When preparing consolidated financial statements, the parent company concept focuses on the interests of the parent company's shareholders. Under this concept, non-controlling interest (NCI), also known as minority interest, is reported in the subsidiary's net income as a deduction in arriving at consolidated net income. This means that the net income attributable to the non-controlling shareholders of the subsidiary is subtracted from the total consolidated net income to determine the net income attributable to the parent company's shareholders.
The economic unit concept (b) treats the consolidated entity as a single economic entity, regardless of the legal ownership structure. Under this concept, all of the subsidiary's income, expenses, assets, and liabilities are included in the consolidated financial statements in full, with a separate line item showing the non-controlling interest's share of equity and net income.
Proportional consolidation (c) is a method used for joint ventures where the parent company includes its proportionate share of the joint venture's assets, liabilities, income, and expenses in its consolidated financial statements. This method is not typically used for subsidiaries where the parent has control.
Therefore, the parent company concept is the method that reports the NCI in the subsidiary's net income as a deduction in arriving at consolidated net income in the consolidated income statement.

_____ Which of the Following Methods Reports the NCI in the Subsidiary's