Question

What is a basic premise of the acquisition method regarding accounting for a noncontrolling interest?

a. Consolidated financial statements should be primarily for the benefit of the parent company's stockholders.
b. Consolidated financial statements should be produced only if both the parent and the subsidiary are in the same basic industry.
c. A subsidiary is an indivisible part of a business combination and should be included in its entirety regardless of the degree of ownership.
d. Consolidated financial statements should not report a noncontrolling interest balance because these outside owners do not hold stock in the parent company.

Answer 1

The basic premise of the acquisition method regarding accounting for a noncontrolling interest is that a subsidiary should be included in its entirety regardless of the degree of ownership.

Step-by-step explanation:

The basic premise of the acquisition method regarding accounting for a noncontrolling interest is that a subsidiary is an indivisible part of a business combination and should be included in its entirety regardless of the degree of ownership. This means that even if the parent company does not have full ownership of the subsidiary, it should still consolidate the subsidiary's financial statements with its own. This is because the parent company has the ability to control and influence the subsidiary's operations and financial decisions.