A parent loans $50,000 to its 80 -percent-owned subsidiary in 2022. The loan carries a 2 -percent interest rate. The parent charges the subsidiary $400 in interest in 2022, and $1,000 in interest in 2023. The subsidiary pays the interest each year, but the loan balance is outstanding at the end of 2023. How are the parents 2023 equity in net income and consolidated income to the noncontrolling interest affected by this intercompany loan?

Select one:

a.

Equity in net income		Noncontrolling interest in net income
$1,000 increase		no effect

b.

Equity in net income		Noncontrolling interest in net income
$800 increase		$200 increase

c.

Equity in net income		Noncontrolling interest in net income
no effect		no effect