Manuel Ltd. purchases 65% of Faiz Co. Under the entity method of consolidation, what is allocated to non-controlling interest?
A)35% of Faiz's net assets at fair value.
B)35% of Faiz's net assets at carrying value plus 35% of Faiz's fair value increments including goodwill.
C)35% of Faiz's net assets at carrying value.
D)35% of Faiz's net assets at carrying value plus 35% of Faiz's fair value increments excluding goodwill.

Question

Quizplus · Accepted Answer

Under the entity method of consolidation, the non-controlling interest is allocated a share of the subsidiary's net assets at their fair value. Since Manuel Ltd. owns 65% of Faiz Co., the non-controlling interest would be allocated 35% of Faiz's net assets at fair value.