The following data pertains to questions
Parent and Sub Inc had the following balance sheets on July 31,2007: The Net Incomes for Parent and Sub Inc for the year ended July 31,2007 were $120,000 and $60,000 respectively.
-Assuming that Parent Inc.purchased 80% of Sub's voting shares on the date of acquisition for $180,000,what would be the amount of the Non-Controlling Interest on the date of acquisition if the Entity Method were used?
A)$104,000
B)$26,000
C)$ 45,000
D)$38,000

Question

The following data pertains to questions 
Parent and Sub Inc had the following balance sheets on July 31,2007:  The Net Incomes for Parent and Sub Inc for the year ended July 31,2007 were $120,000 and $60,000 respectively.
-Assuming that Parent Inc.purchased 80% of Sub's voting shares on the date of acquisition for $180,000,what would be the amount of the Non-Controlling Interest on the date of acquisition if the Entity Method were used?
A)$104,000 
B)$26,000 
C)$ 45,000 
D)$38,000

Quizplus · Accepted Answer

According to the Entity Method of consolidation, the Non-Controlling Interest (NCI) is the portion of the Sub's equity not held by the Parent. 
Sub's total equity on the date of acquisition = $180,000 (given in the question)
Parent's share of equity at the date of acquisition = 80% of Sub's equity = 0.8*$180,000 = $144,000 
Therefore, NCI at the date of acquisition = Sub's total equity - Parent's share of equity 
= $180,000 - $144,000 = $36,000 
However, this is the NCI on the date of acquisition. The NCI balance in subsequent periods will depend on the NCI share of Sub's net income or loss, which is not provided in the question.

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