Question

Required information (The following information applies to the questions displayed below.) Select the correct answer for each of the following questions. Parts 1 and 2 are based on the following: On January 2, 20X8, Paint Company acquired 75 percent of Stain Company's outstanding common stock at an amount equal to its underlying book value. Selected balance sheet data at December 31, 20x8, follow: Total Assets Liabilities Common Stock Retained Earnings Paint Company $420,000 $120,000 100,000 200,000 $420,000 Stain Company $180,000 $ 60,000 50,000 70,000 $180,000 1. In Paint's December 31, 20X8, consolidated balance sheet, what amount should be reported as noncontrolling interest in net assets?

A. 0

B. 105,000

c. 30,000

D. 45,000

Answer 1

The correct answer is C 30,000.

A non-controlling interest, also called NCI or minority interest, is an ownership position where a corporate shareholder owns less than 50 percent of outstanding shares and can only influence management decisions instead of controlling them. In above question Paint Company acquired 75% of Common Stock of  Stain Company i.e. 25 % of Stake is by Non Controlling Interest or Minority Interest.

Calculation of Non Controlling Interest
Particulars	Amount
Common Stock ( 50,000 *25%)	12,500
Retained Earnings ( 70,000 *25%)	17,500
Non Controlling Interest	30,000

NCI is the available portion of net assets not owned by the Parent. In above question 75% of net assets is acquried by Paint and 25 % is held by Minority.

Alternatively
Particulars	Amount
Assets	180,000
Less : Liabilities	-60,000
Net Assets	120,000
Non Controlling Interest (Net Assets*25%)	30,000