A residual interest is:
A) a claim to a fixed percentage return on the amount invested.
B) a priority claim over the assets of the entity as the right of an owner.
C) a claim or right to the net assets of the reporting entity.
D) the minimum entitlement of the holder of the interest.

Question

Quizplus · Accepted Answer

A residual interest represents a claim or right to the net assets of the reporting entity after deducting all liabilities. Option A is incorrect because it refers to a fixed percentage return, which is not necessarily applicable to a residual interest. Option B is incorrect because while owners may have priority claims over the assets of the entity, this does not necessarily constitute a residual interest. Option D is incorrect because there is no minimum entitlement associated with a residual interest; it is calculated based on the net assets of the entity.

A Residual Interest Is