. Pre acquisition profit in the subsidiary company is considered as


A: Revenue profit

B: Capital profit

C: Goodwill

D: Minority interest

 

Best Answer

Explanation:

  • Pre-acquisition profit is the profit that is earned by the company before it is taken over by the another company.
  • Revenue profit is the profit that is earned by the regular operation of the business concern. It is recurring in nature.
  • Capital profits are those profits that are not recurring in nature. Like profit from the sale of an asset.

The pre-acquisition profit is also treated as capital profit and is not available for distribution as a dividend to shareholders.

  • Goodwill refers to the good image of the business concern. It is calculated as the

amount paid to purchase the business concern is excess over the net assets of that business concern.

  • Minority interest represents the amount of investment of the parent company in its subsidiary company.

Final answer: Hence, the correct answer is option B: Capital profit.

 

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