Demski, Inc., manufactures heating and cooling systems. It has a 75% interest in Asare Company, which manufactures thermostats, switches, and other controls for heating and cooling products. It also has a 100% interest in Demski Finance Company, created by the parent company to finance sales of its products to contractors and other consumers. The parent company's only other investment is a 25% interest in the common stock of Knechel, Inc., which produces certain circuits used by Demski, Inc., A condensed consolidated balance sheet of the entity for the current year follows.

This balance sheet, along with other financial statements, was furnished to shareholders before their annual meeting, and all shareholders were invited to submit questions to be answered at the meeting. As chief financial officer of Demski, you have been appointed to respond to the questions at the meeting.

REQUIRED

Answer the following shareholder questions.

a. What is meant by consolidated financial statements?

b. Why is the investment in Knechel shown on the consolidated balance sheet, but the investments in Asare and Demski Finance are omitted?

c. Explain the meaning of the asset Excess of Cost over Equity Acquired in Net Assets of Asare Company.

d. What is meant by noncontrolling interest and to what company is this account related?

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DEMSKI, INC., AND SUBSIDIARIES Consolidated Balance Sheet December 31, 2019 Assets Current assets Stock investment-Influential (Knechel). Other assets. Excess of cost over equity acquired in net assets of Asare Company. $19,300,000 2,600,000 71,400,000 1,700,000 Total assets $95,000,000 Liabilities and shareholders' equity Current liabilities.... Long-term liabilities. Shareholders' equity $10,300,000 14.200,000 Common stock.. $50,000,000 Retained earnings 16,700,000 Dernski, Inc., shareholders' equity Noncontrolling interests. 66,700.000 3,800,000 Total shareholders' equity. . 70,500,000 Total liabilities and shareholders' equity. $95.000,000