Question 10 10 points Ssve The noncontrolling interest in co

Question 10 10 points Ssve The noncontrolling interest in consolidated income when the selling affiliate is an 80% owned subsidiary is calculated by multiplying the minoritydelete minority ownership percentage by the subsidiary\'s reported net income O A. less unrealized profit in ending inventory plus realized profit in beginning inventory O B. plus realized profit in ending inventory less realized profit in beginning inventory. ? c. less realized profit in ending inventory plus realized profit in beginning inventory 0 D.plus unrealized profit in ending inventory less unrealized profit in beginning inventory.

Solution

The ending inventory of previous year becomes the beginning inventory of current year and the current year ending inventory will become the beginning inventory of the next year. Therefore, the profit on the inventory which has not been sold at year end if not eliminated will overstate the net income and unrealized profit in the beginning inventory will understate consolidated net income. Therefore, to overcome the problem of understated and overstated consolidated net income it is necessary to deduct the unrealized profit in ending inventory and add the realized profit in beginning inventory.