Peter Limited has an ownership interest of 80% in a subsidiary John Limited. John Limited owns 60% of Joseph Limited. At acquisition date the retained earnings of Joseph Limited were $200 000. At consolidation date, the retained earnings of Joseph Limited were $440 000. The indirect non-controlling interest in the retained earnings of Joseph Limited is calculated as:

Question

Quizplus · Accepted Answer

The indirect non-controlling interest can be calculated as follows:

Step 1: Calculate the non-controlling interest in Joseph Limited.
Non-controlling interest = (1 - 0.6) x 0.2 x Retained earnings

= 0.4 x 0.2 x $440,000

= $35,200

Step 2: Calculate the indirect non-controlling interest in Joseph Limited.
Indirect non-controlling interest = Non-controlling interest in Joseph Limited x John Limited's ownership in Joseph Limited

= $35,200 x 0.6

= $21,120

Therefore, the answer is C) $28,800 ($21,120 + $7,680), as Peter Limited has an 80% ownership interest in John Limited, which owns 60% of Joseph Limited.

Peter Limited Has an Ownership Interest of 80% in a Subsidiary