Which of the following is not a correct statement about noncontrolling interest?

A. Noncontrolling interest represents their claim to their proportionate share of the net assets and net income of the subsidiary in which they own stock.

B. Noncontrolling interests are entitled to preference in dividends and payouts in liquidation.

C. Noncontrolling interest is reported as a component of stockholders' equity on the balance sheet.

D. Noncontrolling interest is a residual claim, like that of any other shareholder.

Noncontrolling interests are entitled to preference in dividends and payouts in liquidation is not a correct statement about noncontrolling interest.

Option B

Explanation:

Non-controlling interest (NCI) is the part of the equity in a corporation not directly related to a parental company that has a controlling interest (above 50% but below 100%) and strengthens the financial results of the corporation with its own.

Suppose, for example, that Alpha acquires 80 percent of Sierra's outstanding stock. As Alpha controls over 50% of the Sierra region, Alpha consolidates the financial performance of Sierra that has its own financial results.

Alpha's balance sheet reports as NCI 20 percent of the Sierra equity which Alpha does not own. In proportion to their amounts of holding, the Incorporated Net Income is assigned to parental and non-controlling interest parties (minority shareholders); 80% to Alpha and, in this situation, 20% to un-controlling interest.