A Ltd holds a 60% interest in B Ltd. On 1 January 2014 B Ltd paid an interim dividend of €25 000 and on 30 June 2014 B Ltd declared a final dividend of €15 000. The NCI journals at 30 June 2014 will include:
A) DR Interim dividend paid €10 000
B) DR NCI €16 000
C) CR Dividend receivable €6 000
D) CR Final dividend declared €9 000

Question

Quizplus · Accepted Answer

The NCI (non-controlling interest) must be accounted for in the dividend declared by the subsidiary. As A Ltd holds a 60% interest in B Ltd, this means that the NCI holds a 40% interest. Therefore, the NCI's share in the final dividend declared by B Ltd would be €6,000 (40% of €15,000), which would be recorded as a debit to NCI in the journals. The interim dividend paid by B Ltd is not relevant to the NCI, as it would have been paid at a time when the NCI did not yet exist. The dividend receivable and final dividend declared are also not relevant to the NCI.

A Ltd Holds a 60% Interest in B Ltd