The entity theory requires that the income and equity of a subsidiary be determined for all stockholders; therefore the total amounts will be allocated between controlling and noncontrolling shareholders.

Question

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The entity theory recognizes that a subsidiary is a separate legal entity and requires that its income and equity be determined for all stockholders, including both controlling and noncontrolling shareholders. Therefore, the total amounts will be allocated between these two groups.

The Entity Theory Requires That the Income and Equity of a Subsidiary