A company owning a majority (but less than 100%)of another's voting shares on the date of acquisition should account for its subsidiary
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 account.

Question

Quizplus · Accepted Answer

When a company owns a majority but less than 100% of another company's voting shares, it is considered a parent company and the other company is the subsidiary. The parent company should include 100% of the fair market values of the subsidiary's net assets in its financial statements. Additionally, any unowned portion of the subsidiary's voting shares should be accounted for using the Non-Controlling Interest account. This is done to reflect the portion of the subsidiary's net assets that is not owned by the parent company. Therefore, choice D is the best choice.

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