The parent company acquires all of a subsidiary’s common stock but only 70 percent of its preferred shares. This preferred stock pays a 7 percent annual cumulative dividend. No dividends are in arrears at the current time. How is the noncontrolling interest’s share of the subsidiary’s income computed?
a. As 30 percent of the subsidiary’s preferred dividend.
b. No allocation is made because the dividends have been paid.
c. As 30 percent of the subsidiary’s income after all dividends have been subtracted.
d. Income is assigned to the preferred stock based on total par value and 30 percent of that amount is allocated to the noncontrolling interest.