In calculating the non-controlling interest in earnings, what is one of the adjustments that must be made to the subsidiary's separate-entity earnings before the NCI percentage can be applied?
A)Adjust for only realized profits from upstream sales.
B)Adjust for only unrealized profits from upstream sales.
C)Adjust for both realized and unrealized profits from upstream sales.
D)Adjust for both realized and unrealized profits from downstream sales.

Question

Quizplus · Accepted Answer

The adjustment that must be made to the subsidiary's separate-entity earnings before applying the NCI percentage is to adjust for both realized and unrealized profits from upstream sales. This is because the parent company may have made upstream sales to the subsidiary that have not yet been sold to outside customers or may have included profits in the transfer price that need to be adjusted for. Therefore, it is important to adjust for both realized and unrealized profits in order to accurately calculate the non-controlling interest in earnings.

In Calculating the Non-Controlling Interest in Earnings, What Is One