When you create an income distribution schedule for consolidated net income, the distributions:
A)are allocated equally between Company P and Company S.
B)should use the controlling/noncontrolling interest ownership with respect to both common and preferred shares.
C)for the parent Company P should convert its investment to its equity balance if it is not using the cost method.
D)none of the above

Question

When you create an income distribution schedule for consolidated net income, the distributions:
A)​are allocated equally between Company P and Company S.
B)​should use the controlling/noncontrolling interest ownership with respect to both common and preferred shares.
C)​for the parent Company P should convert its investment to its equity balance if it is not using the cost method.
D)​none of the above

Quizplus · Accepted Answer

When creating an income distribution schedule for consolidated net income, the distributions should use the controlling/noncontrolling interest ownership with respect to both common and preferred shares. This means that the allocation of income should take into consideration the ownership percentage of both the parent company (Company P) and the subsidiary company (Company S). The allocation should also differentiate between common and preferred shares of both companies, if applicable. This helps to ensure that the distribution of income is fair and reflective of each company's ownership interest. Option A is incorrect as allocations should not necessarily be equal between the companies. Option C is incorrect as converting the investment to equity is only applicable when using the equity method of accounting, and may not necessarily be required for all circumstances. Option D is incorrect as there is a correct answer.

When You Create an Income Distribution Schedule for Consolidated Net