Reference no: EM132703303
Question 1
Question text
On 1 July 2017 Good Ltd acquired a 100% interest in Life Ltd. At that time Life Ltd had goodwill of $15 000 recorded in its statement of financial position as a result of a previous business combination. The total goodwill arising on Good's acquisition of Life was $34 000. The goodwill to be recognised on consolidation as a result of Good's acquisition of Life is:
Select one:
a. $15 000.
b. $34 000.
c. $49 000.
d. $19 000.
Q2
Question text
King Limited paid $270 000 for 80% of Prince Limited. At the date of acquisition Prince Limited had share capital of $200 000 and retained earnings of $100 000 and all of Prince Limited's assets and liabilities were recorded at fair value. The fair value of identifiable net assets acquired by King Limited amounted to:
Select one:
a. $300 000.
b. $270 000.
c. $216 000.
d. $240 000.
Q3
When goodwill in an associate is acquired by an investor, the amortisation of goodwill is:
Select one:
a. not permitted.
b. included in the determination of the investor's share of the associate's profit or loss.
c. spread evenly across the useful life of the investment.
d. included in the revaluation of the investment.
Q4
When Wayne Ltd acquired 100% of the share capital of Carol Ltd, the carrying amount of Carol Ltd's machinery was $350 000. The fair value of the machinery on acquisition date was $260 000. The company tax rate was 30%. What is the amount of the business combination valuation reserve that will be recognised on consolidation?
Select one:
a. $182 000
b. $63 000
c. $90 000
d. $245 000
Q5
Thurston Limited sold inventories to its parent entity, Cowboys Ltd, at a before-tax profit of $8000. The inventories originally cost Thurston Limited $32 000. At balance sheet date, Cowboys Limited had sold 80% of the inventory to an external party. The consolidation adjustment entry (excluding tax effects) will eliminate unrealised profit amounting to:
Select one:
a. $1 600.
b. $24 000.
c. $800.
d. $6 400.
Q6
If a subsidiary is not wholly owned by the parent there are two ownership interests which are known as the:
Select one:
a. parent and non-parent interest.
b. group and non-group interest.
c. parent and non-group interest.
d. parent and non-controlling interest.
Q7
Ownership interests in a subsidiary entity that do not belong to the parent entity are known as:
Select one:
a. non-controlling interests.
b. non-parent interests.
c. unowned interests.
d. external equity interests.
Q8
A subsidiary sold inventories to its parent for $50 000. The inventories originally cost the subsidiary $38 000. At balance sheet date, the parent had sold 50% of the inventories to an external party. The company tax rate is 30%. Which of the following is the deferred tax item that is recognised on consolidation?
Select one:
a. Dr Deferred tax asset $3600
b. Cr Deferred tax liability $3600
c. Cr Deferred tax liability $1800
d. Dr Deferred tax asset $1800
Q9
For the purposes of equity accounting, significant influence is defined as the power of an investor to:
Select one:
a. dominate the financing decisions of an entity.
b. participate in the day-to-day management of a joint venture interest.
c. control the financial and operating policies of an associate.
d. participate in the financial and operating policy decisions of an investee.
Q10
XYZ Limited has two subsidiary entities, Gogo Limited and Gigi Limited. XYZ Limited owns 100% of the shares in both entities. Details of the issued share capital are: (a) XYZ Limited $300 000, (b) Gogo Limited $60 000 and (c) Gigi Limited $40 000. The consolidated share capital amount of the group is:
Select one:
a. $360 000.
b. $400 000.
c. $300 000.
d. $100 000.
Q11
Question text
Which of the following intragroup transactions do not affect the carrying amounts of assets and liabilities?
Select one:
a. Management fees paid
b. Sale of inventories at a loss
c. Sale of plant at a profit
d. Sale of land for an amount greater than its carrying amount
Q12
Question text
The pre-acquisition entry is necessary to:
Select one:
a. avoid overstating the equity and net assets of the parent.
b. record the ‘Shares in subsidiary' account in the parents records.
c. avoid overstating the equity and net assets of the group.
d. avoid understating the equity and net assets of the group.
Q13
Under the conceptual framework for international financial reporting a non-controlling interest fits the definition of:
Select one:
a. an asset.
b. an expense.
c. an equity item.
d. a liability.
Q14
A subsidiary sold inventories to its parent for $40 000. The inventories originally cost the subsidiary $32 000. At balance sheet date, the parent had 30% of the inventories still on hand. The consolidation adjustment entry (excluding tax effects) will eliminate unrealised profit amounting to:
Select one:
a. $2400.
b. $5600.
c. $12000.
d. $8000.
Q15
Queen Limited owns 90% of the share capital of King Limited. King Limited paid a dividend of $40000 during the financial period. The adjustment entries in the consolidation worksheet for the dividend include which of the following?
Select one:
a. DR Dividend revenue $40 000
b. DR Dividend revenue $36 000
c. DR Dividend payable $36 000
d. DR Dividend receivable $40 000
Q 16
Jack Limited acquired 80% of the share capital and reserves of Jill Limited for $300 000. Share capital was $200 000 and reserves amounted to $100 000. All assets and liabilities were recorded at fair value except buildings which was recorded at $20 000 below fair value. The fair value of the NCI at the date of Jack's acquisition was $70 000 and the full goodwill method is adopted by the group. If the company tax rate was 30%, the total goodwill in relation to this business combination amounts to:
Select one:
a. $44 800.
b. $56 000.
c. $48 800.
d. $11 200.
Q17
Unity Limited acquired 100% of the share capital of Bellvista Limited. Bellvista had issued share capital of $400 000. The book values of Bellvista Limited's assets were: buildings $200 000, machinery $210 000. The fair values of these assets were: buildings $260 000, machinery $240 000. The tax rate is 30%. The fair value of the identifiable net assets is:
Select one:
a. $400 000.
b. $500 000.
c. $410 000.
d. $463 000
Q18
A subsidiary sold a quantity of inventories to its parent entity for $58 000. The original cost of the inventories to the subsidiary was $45 000. At the end of the year all of the inventories were still on hand. The consolidation adjustment entry to eliminate this transaction will include which of the following line items?
Select one:
a. Cr Inventories $58 000
b. Cr Inventories $45 000
c. Cr Inventories $13 000
d. Cr Inventories $32 000
Q19
A parent sold some inventories to its subsidiary for $55 000. The goods had originally cost the parent $40 000. At the end of the year all of the inventories were still on hand. The consolidation adjustment entry to eliminate this transaction will include the following line items?
Select one:
a. Cr Cost of sales $40 000
b. Cr Cost of sales $15 000
c. Cr Cost of sales $55 000
d. Cr Cost of sales $95 000
Q20
Wendy Limited paid $140 000 for 75% of Yum Limited. At the date of acquisition Yum Limited had equity were share capital of $110 000, retained earnings of $55 000 and reserves of $35 000. All of Yum Limited's assets and liabilities were recorded at fair value. The fair value of identifiable net assets acquired by Wendy Limited amounted to:
Select one:
a. $105 000.
b. $200 000.
c. $135 000.