1. a. What is a non-controlling interest?
b. Why must it be reported in the financial statements as an element of equity rather than a liability?
2. The following intercompany transactions occurred during the year:
Parent loaned $200 to Sub. To keep things simple, assume that there is no interest revenue or interest expense associated with this loan.
Parent made a sale to Sub for $300 cash. The inventory had originally cost Parent $220. Sub then sold that same inventory to an outsider for $400.
Parent made a sale to Sub for $500 cash. The inventory had originally cost Parent $280. Sub has not yet sold that same inventory to an outsider. (Don’t forget equity method entry!)
Based on our “conceptual discussion” what consolidation worksheet entries would you make?
3. What is the treatment of unrealised profit or losses in case of intercompany transfer of inventory?