HRN Enterprises Inc. purchases 80% of the outstanding voting shares of NHR Inc. on January 1, 2018. On that date, which of the following statements pertaining to non-controlling interest (NCI) is TRUE?

Question

Quizplus · Accepted Answer

Non-controlling interest (NCI) is the portion of the subsidiary that is not owned by the parent company. In this case, since HRN purchased 80% of NHR, their non-controlling interest (NCI) account will include the remaining 20% of the fair value of NHR's net assets. The fair value is the amount the asset could be sold for on the open market, whereas the book value is the value of the asset as it appears on the company's balance sheet. The acquisition differential is the difference between the purchase price and the fair value of NHR's net assets, but since the question is asking about NCI, the correct answer is A.