Under the Proprietary Theory, non-controlling interest (NCI) is:
A) nonexistent. Goodwill is established based on the Parent's pro-rata share of any acquisition differential.
B) nonexistent. Goodwill is established based on the Parent's acquisition cost.
C) based on the fair market values of the subsidiary's net assets. Goodwill is established based on the Parent's acquisition cost.
D)based on the book values of the subsidiary's net assets. Goodwill is established based on the Parent's acquisition cost.

Question

Quizplus · Accepted Answer

Under the Proprietary Theory, non-controlling interest (NCI) is nonexistent. Goodwill is established based on the Parent's acquisition cost. This means that the Parent records the full amount of the purchase price and any excess over the net assets acquired is recorded as goodwill on the Parent's balance sheet. NCI is not recognized separately, as the Parent is considered to own 100% of the subsidiary. Therefore, the answer is B.

Under the Proprietary Theory, Non-Controlling Interest (NCI) Is