Answer:
15 percent
Explanation:
The maximum total interest in any company is 100%. Since 85% of the common stock of Star Company was acquired by Peta Company, Peta Company is automatically the parent company to Star Company no matter the amount of cash its paid for the acquisition while the remaining 15% will automatically be classified as non-controlling interest.
Therefore, noncontrolling interest can be calculated as follows:
Noncontrolling interest = Total interest - Peta company's interest
= 100% - 85% = 15%
Therefore, 15 percent is the portion of the retained earnings reported in the consolidated balance sheet prepared immediately after the business combination that is assigned to the noncontrolling interest. The amount paid for the percentage interest acquisition does matter when profit is been shared between the parent company and the non-controlling interest.
Note:
A parent company is a company that has more than 50 percent of outstanding shares and therefore it is in charge of all decision making of the company. The company it acquired its more than 50 percent outstanding shares now becomes its subsidiary.
Non-controlling interest refers to the ownership of less than 50 percent of outstanding shares in a company and therefore not in charge of all decision making of the company. It is also referred as the minority interest.
