The parent owns 60% of the subsidiary. The subsidiary’s net income is 65. Question: The incremental effect on the parent’s net income from its investment in the subsidiary is: ? A) 39 B) 45 C) 65
39: 40% to the minority interest, 60% to the parent
that is exactly correct. nice work.
Oh thanks…What did you think the answer was? I thought there was somehow more to this and it was a trick question of some form!
I thought this was a trick Q somehow as well, I read every word very carefully and still expected to get it wrong somehow. I wish all CFAI Q’s were like this - very straight to the point.
no tricks, not really. I know for myself, when I see consolidation method I usually consolidate revenues and expenses, but now I know that I have to subtract the minority interest from net income
yes…just remember net income is the bottom line for the I/S