A company owning a majority (but less than 100%) of another company's voting shares on the date of acquisition should account for its subsidiary (in its consolidated balance sheet):
A) by including only its share of the fair market values of the subsidiary's net assets.
B) by including only its share of the book values of the subsidiary's net assets.
C) by including 100% of the fair market values of the subsidiary's net assets.
D)by including 100% of the fair market values of the subsidiary's net assets and accounting for any unowned portion of the subsidiary's voting shares using the non-controlling interest (NCI) account.

Question

Quizplus · Accepted Answer

When a company owns a majority but less than 100% of another company's voting shares, it has control over the subsidiary but not total control. Therefore, it should include 100% of the fair market values of the subsidiary's net assets in its consolidated balance sheet, but also account for any unowned portion of the subsidiary's voting shares using the non-controlling interest (NCI) account. This allows for the accurate representation of the company's ownership and control over the subsidiary.

A Company Owning a Majority (But Less Than 100%) of Another