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-Carns
C)Carn will be included in the consolidation process; 40% of prior period amortizations will be distributed to Retained Earnings-Carns
D)Carn will be included in the consolidation process; NCI will be allocated 6.4% of prior-period profits originated by Carns

Question

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-Carns
C)​Carn will be included in the consolidation process; 40% of prior period amortizations will be distributed to Retained Earnings-Carns
D)​Carn will be included in the consolidation process; NCI will be allocated 6.4% of prior-period profits originated by Carns

Quizplus · Accepted Answer

Carn is a subsidiary of Barns, which is a subsidiary of Able. Therefore, Carn is a sub-subsidiary of Able and must be included in the consolidation process. Since Able owns 20% of Carns directly and 40% of Carns indirectly through Barns, Able's total ownership interest in Carns is 60%. Therefore, 40% of Carns' prior period amortizations will be distributed to Retained Earnings-Carns.

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