Question 1

Reciprocal shareholdings exist when:

Accepted Answer

A)  a parent owns shares in a subsidiary. 
B)  a subsidiary owns shares in a parent only. 
C)  a parent owns shares in a subsidiary and in a joint venture. 
D)  a parent and a subsidiary own shares in each other. 
A)  a parent owns shares in a subsidiary. 
B)  a subsidiary owns shares in a parent only. 
C)  a parent owns shares in a subsidiary and in a joint venture. 
D)  a parent and a subsidiary own shares in each other. D

Question 2

Which of the following can result in a loss of control by a parent over a subsidiary?

Accepted Answer

A)  The parent sells some of the shares in the subsidiary. 
B)  There is a change in the dispersion in the holding of shares by entities comprising the NCI. 
C)  There may be a change in a contractual arrangement. 
D)  All of the above. 
A)  The parent sells some of the shares in the subsidiary. 
B)  There is a change in the dispersion in the holding of shares by entities comprising the NCI. 
C)  There may be a change in a contractual arrangement. 
D)  All of the above. D

Question 3

When a partly owned subsidiary receives a dividend from an entity that they have an interest in, an adjustment must be made to the current year profit prior to calculation of the direct NCI share of profit.

Accepted Answer

A) True 
 B)False  True

Question 4

Waratah Ltd acquired a 60% ownership interest in Bottle Brush Ltd on 30 June 20X5. On the same day, Bottle Brush Ltd acquired a 70% ownership interest in Honeydew Ltd. The following inter-entity transactions have taken place between the entities in the group during the years ended 30 June 20X6 and 30 June 20X7.
On 1 July 20X5 Bottle Brush sold an item of plant to Honeydew for a profit of $20 000.
The remaining useful life of the plant at the date of transfer was 4 years.
-On 1 September 20X5, Honeydew paid a dividend of $70 000 from profits earned since 30 June 20X5.
-Waratah lent $50 000 to Bottle Brush on 1 January 20X6. Interest charged on the loan for the year ended 30 June 20X6 was $2000 and for the year ended 30 June 20X7 was $4000.
On 31 May 20X6 Waratah sold inventories to Honeydew for $15 000. Profit earned on the sale was $5000. Honeydew sold the inventories to external parties on 1 August 20X6.
Details of profits earned by entities within the group for the years ended 30 June 20X6 and 30 June 20X7 are:
$$\begin{array} { | l | l | l | } 
\hline & 30 \text { June 20X6 } & 30 \text { June } 20 \times 7 \
\hline \text { Waratah } & 100000 & 125000 \
\hline \text { Bottle Brush } & 85000 & 70000 \
\hline \text { Honeydew } & 20000 & 35000 \
\hline
\end{array}$$ The tax rate is 30%.
The NCI share of profit in Bottle Brush for the year ended 30 June 20X6 is:

Accepted Answer

A)  $11 600. 
B)  $13 000. 
C)  $13 800. 
D)  $29 800. 
A)  $11 600. 
B)  $13 000. 
C)  $13 800. 
D)  $29 800.

Question 5

An indirect non-controlling interest arises:

Accepted Answer

A)  only when a wholly owned subsidiary owns shares in another subsidiary. 
B)  when a partly owned subsidiary owns shares in the parent entity. 
C)  when a wholly owned subsidiary owns shares in the parent entity. 
D)  only when a partly owned subsidiary holds shares in another subsidiary. 
A)  only when a wholly owned subsidiary owns shares in another subsidiary. 
B)  when a partly owned subsidiary owns shares in the parent entity. 
C)  when a wholly owned subsidiary owns shares in the parent entity. 
D)  only when a partly owned subsidiary holds shares in another subsidiary.

Question 6

Investments in subsidiaries by another partly owned subsidiary where the acquisition is non-sequential require adjustments to be made to the fair value of the investments.

Accepted Answer

A) True 
 B)False

Question 7

In order to consolidate an 80% interest in a subsidiary, the Eassie group prepared the following pre-acquisition entry. DR Retained earnings $4 000
DR Share capital $30 000
DR General reserve $6 000
CR Investment in subsidiary $40 000
The interest in equity attributable to the direct non-controlling interest is:

Accepted Answer

A)  $10 000. 
B)  $32 000. 
C)  $8000. 
D)  $40 000. 
A)  $10 000. 
B)  $32 000. 
C)  $8000. 
D)  $40 000.

Question 8

The calculation of the direct NCI share of equity is the same as that for the indirect NCI share of equity.

Accepted Answer

A) True 
 B)False

Question 9

When calculating the direct non-controlling interest share of equity, consolidation adjustments are needed to:

Accepted Answer

A)  remove unrealised profits or losses from intragroup transactions. 
B)  recognise profits made on intragroup services. 
C)  eliminate intragroup advances. 
D)  partially eliminate profits on intragroup services. 
A)  remove unrealised profits or losses from intragroup transactions. 
B)  recognise profits made on intragroup services. 
C)  eliminate intragroup advances. 
D)  partially eliminate profits on intragroup services.

Question 10

Consider the following economic entity structure. $$\text { PLtd }$$ 70% 20%
    $\text { A Ltd }$ $\text { B Ltd }$   60%
The direct non-controlling interests (DNCI) and indirect non-controlling interests (INCI) are:
$\begin{array}{cccc}
\text { DNCl in A Ltd} &\text { INCI in A Itd }&\text { DNCI in B Ltd }&\text { INCI in B Itd}\
30 \% & \text { Nil } & 80 \% & 18 \% \
30 \% & 12 \% & 40 \% & 18 \% \
30 \% & \text { Nil } & 12 \% & 18 \% \
30 \% & \text { Nil } & 20 \% & 18 \%
\end{array}$

Accepted Answer

The answer of Consider the following economic entity structure. \[\text...

Question 11

Realty Group had the following debits in the pre-acquisition entry used to consolidate a 60% direct ownership interest in a subsidiary: Retained earnings $60 000, Share capital $120 000, General Reserve $24 000, BCVR $12 000. The amount attributable to the direct non-controlling interest is:

Accepted Answer

A)  $129 600. 
B)  $144 000. 
C)  $86 400. 
D)  $216 000. 
A)  $129 600. 
B)  $144 000. 
C)  $86 400. 
D)  $216 000.

Question 12

Consider the following economic entity structure: $\text { PLtd }$   90%
$\text { A Ltd }$   60%
$\text { B Ltd }$ The direct non-controlling interest (DNCI) and indirect non-controlling interest (INCI) are as follows.
$\begin{array}{llcc}
  \text {  DNCI in A Ltd} &  \text { INCI in A Ltd } &  \text { DNCI in B Ltd }&  \text { INCI in B Ltc
}\
\end{array}$
a.$\begin{array}{llcc}
 10\%&&&&&&& \text {  Nil} &&&&&&40\%&&&&&&6\% \
\end{array}$

b.
$\begin{array}{llcc}
10\%&&&&&&&&14\%&&&&&40\%&&&&&&6\% \
\end{array}$

c.
$\begin{array}{llcc}
40\% &&&&&&& &\text {Nil  }&&&& & 10\%&&&&&&6\% \
\end{array}$

d.
$\begin{array}{llcc}
 40\%&&&&&&&& \text {Nil  }&&&& & 10\%&&&&&&54\% \
\end{array}$

Accepted Answer

The answer of Consider the following economic entity structure: \(\text...

Question 13

In a multiple subsidiary structure, the indirect non-controlling interest is entitled to a proportionate share of:

Accepted Answer

A)  pre-acquisition equity. 
B)  post-acquisition equity only. 
C)  both pre- and post-acquisition equity. 
D)  neither pre- nor post-acquisition equity. 
A)  pre-acquisition equity. 
B)  post-acquisition equity only. 
C)  both pre- and post-acquisition equity. 
D)  neither pre- nor post-acquisition equity.

Question 14

An indirect NCI arises only where a partly owned subsidiary holds shares in another partly owned subsidiary.

Accepted Answer

A) True 
 B)False

Question 15

Kerri Limited has a 60% ownership interest in Emily Limited. Emily Limited has an 80% ownership interest in Georgia Limited. As a result of these ownership interests, there is an indirect NCI in Georgia Limited of:

Accepted Answer

A)  48%. 
B)  12%. 
C)  8%. 
D)  32%. 
A)  48%. 
B)  12%. 
C)  8%. 
D)  32%.

Question 16

The indirect NCI is entitled to a share of any movements in the business combination valuation reserves that occur subsequent to the acquisition of a subsidiary.

Accepted Answer

A) True 
 B)False

Question 17

In a multiple subsidiary structure, the direct non-controlling interest is entitled to a proportionate share of:

Accepted Answer

A)  pre-acquisition equity only. 
B)  pre- and post-acquisition amounts of equity. 
C)  post-acquisition amounts of equity only. 
D)  post-acquisition balance of retained earnings only. 
A)  pre-acquisition equity only. 
B)  pre- and post-acquisition amounts of equity. 
C)  post-acquisition amounts of equity only. 
D)  post-acquisition balance of retained earnings only.

Question 18

Jacaranda Limited acquired a 75% ownership interest in Frangipani Limited on 30 June 20X5. On the same day, Frangipani Limited acquired a 60% ownership interest in Gardener Limited. The following inter-entity transactions have taken place between the entities in the group during the years ended 30 June 20X6 and 30 June 20X7: On 1 July 20X5 Gardener sold an item of plant to Jacaranda for a profit of $25 000. The remaining useful life of the plant at the date of transfer was 2 years.
On 1 September 20X5, Gardener paid a dividend of $100 000 from profits earned prior to 30 June 20X5.
Jacaranda lent $500 000 to Gardener on 1 January 20X6. Interest charged on the loan for the year ended 30 June 20X6 was $20 000 and for the year ended 30 June 20X7 was $40 000.
On 31 May 20X6 Frangipani sold inventories to Gardener for $15 000. Profit earned on the sale was $1500. Gardener sold the inventories to external parties on 1 August 20X6.
Details of profits earned by entities within the group for the years ended 30 June 20X6 and 30 June 20X7 are:
$$\begin{array} { | l | l | l | } 
\hline & 30 \text { June 20X6 } & 30 \text { June } 20 \times 7 \
\hline \text { Jacaranda } & 100000 & 125000 \
\hline \text { Frangipani} & 45000 & 70000 \
\hline \text { Gardener } & 20000 & 35000 \
\hline
\end{array}$$ The tax rate is 30%.
The NCI share of profit in the Frangipani group for the year ended 30 June 20X6 is:

Accepted Answer

A)  $14 812.50. 
B)  $15 487.50. 
C)  $17 175.00. 
D)  $21 987.50. 
A)  $14 812.50. 
B)  $15 487.50. 
C)  $17 175.00. 
D)  $21 987.50.

Question 19

Waratah Ltd acquired a 60% ownership interest in Bottle Brush Ltd on 30 June 20X5. On the same day, Bottle Brush Ltd acquired a 70% ownership interest in Honeydew Ltd. The following inter-entity transactions have taken place between the entities in the group during the years ended 30 June 20X6 and 30 June 20X7.
On 1 July 20X5 Bottle Brush sold an item of plant to Honeydew for a profit of $20 000. The remaining useful life of the plant at the date of transfer was 4 years.
-On 1 September 20X5, Honeydew paid a dividend of $70 000 from profits earned since 30 June 20X5.
-Waratah lent $50 000 to Bottle Brush on 1 January 20X6. Interest charged on the loan for the year ended 30 June 20X6 was $2000 and for the year ended 30 June 20X7 was $4000.
On 31 May 20X6 Waratah sold inventories to Honeydew for $15 000. Profit earned on the sale was $5000. Honeydew sold the inventories to external parties on 1 August 20X6.
Details of profits earned by entities within the group for the years ended 30 June 20X6 and 30 June 20X7 are:
$$\begin{array} { | l | l | l | } 
\hline & 30 \text { June 20X6 } & 30 \text { June } 20X7 \
\hline \text { Waratah } & 100000 & 125000 \
\hline \text { Bottle Brush } & 85000 & 70000 \
\hline \text { Honeydew } & 20000 & 35000 \
\hline
\end{array}$$ The tax rate is 30%.
The effect of the interest paid by Bottle Brush to Waratah on the NCI of Bottle Brush for the year ended 30 June 20X7 is:

Accepted Answer

A)  nil. 
B)  an increase in MI of $1120. 
C)  an increase in MI of $1600. 
D)  an increase in MI of $2800. 
A)  nil. 
B)  an increase in MI of $1120. 
C)  an increase in MI of $1600. 
D)  an increase in MI of $2800.

Question 20

The indirect NCI is entitled to a share of all movements in reserve accounts.

Accepted Answer

A) True 
 B)False

Reciprocal shareholdings exist when:

Which of the following can result in a loss of control by a parent over a subsidiary?

When a partly owned subsidiary receives a dividend from an entity that they have an interest in, an adjustment must be made to the current year profit prior to calculation of the direct NCI share of profit.

An indirect non-controlling interest arises:

Investments in subsidiaries by another partly owned subsidiary where the acquisition is non-sequential require adjustments to be made to the fair value of the investments.

The calculation of the direct NCI share of equity is the same as that for the indirect NCI share of equity.

When calculating the direct non-controlling interest share of equity, consolidation adjustments are needed to:

Realty Group had the following debits in the pre-acquisition entry used to consolidate a 60% direct ownership interest in a subsidiary: Retained earnings $60 000, Share capital $120 000, General Reserve $24 000, BCVR $12 000. The amount attributable to the direct non-controlling interest is:

In a multiple subsidiary structure, the indirect non-controlling interest is entitled to a proportionate share of:

An indirect NCI arises only where a partly owned subsidiary holds shares in another partly owned subsidiary.

Kerri Limited has a 60% ownership interest in Emily Limited. Emily Limited has an 80% ownership interest in Georgia Limited. As a result of these ownership interests, there is an indirect NCI in Georgia Limited of:

The indirect NCI is entitled to a share of any movements in the business combination valuation reserves that occur subsequent to the acquisition of a subsidiary.

In a multiple subsidiary structure, the direct non-controlling interest is entitled to a proportionate share of:

The indirect NCI is entitled to a share of all movements in reserve accounts.

Nature and Regulation of Companies

Financing Company Operations

Business Combinations

Disclosure: Legal Requirements and Accounting Polices

Disclosure: Presentation of Financial Statements

Disclosure: Statement of Cash Flows

Foreign Currency Transactions and Forward Exchange Contracts

Translation of Financial Statements Into a Presentation Currency

Consolidation: Controlled Entities

Consolidation: Wholly Owned Subsidiaries

Consolidation: Intragroup Transactions

Consolidation: Non-Controlling Interest

Associates and Joint Ventures

Joint Arrangements

Insolvency and Liquidation

Accounting for Company Income Tax

Property, Plant Equipment

Filters

Exam 13: Consolidation: Other Issues

Reciprocal shareholdings exist when:

Which of the following can result in a loss of control by a parent over a subsidiary?

When a partly owned subsidiary receives a dividend from an entity that they have an interest in, an adjustment must be made to the current year profit prior to calculation of the direct NCI share of profit.

An indirect non-controlling interest arises:

Investments in subsidiaries by another partly owned subsidiary where the acquisition is non-sequential require adjustments to be made to the fair value of the investments.

The calculation of the direct NCI share of equity is the same as that for the indirect NCI share of equity.

When calculating the direct non-controlling interest share of equity, consolidation adjustments are needed to:

Realty Group had the following debits in the pre-acquisition entry used to consolidate a 60% direct ownership interest in a subsidiary: Retained earnings $60 000, Share capital $120 000, General Reserve $24 000, BCVR $12 000. The amount attributable to the direct non-controlling interest is:

In a multiple subsidiary structure, the indirect non-controlling interest is entitled to a proportionate share of:

An indirect NCI arises only where a partly owned subsidiary holds shares in another partly owned subsidiary.

Kerri Limited has a 60% ownership interest in Emily Limited. Emily Limited has an 80% ownership interest in Georgia Limited. As a result of these ownership interests, there is an indirect NCI in Georgia Limited of:

The indirect NCI is entitled to a share of any movements in the business combination valuation reserves that occur subsequent to the acquisition of a subsidiary.

In a multiple subsidiary structure, the direct non-controlling interest is entitled to a proportionate share of:

The indirect NCI is entitled to a share of all movements in reserve accounts.

Nature and Regulation of Companies

Financing Company Operations

Business Combinations

Disclosure: Legal Requirements and Accounting Polices

Disclosure: Presentation of Financial Statements

Disclosure: Statement of Cash Flows

Foreign Currency Transactions and Forward Exchange Contracts

Translation of Financial Statements Into a Presentation Currency

Consolidation: Controlled Entities

Consolidation: Wholly Owned Subsidiaries

Consolidation: Intragroup Transactions

Consolidation: Non-Controlling Interest

Associates and Joint Ventures

Joint Arrangements

Insolvency and Liquidation

Accounting for Company Income Tax

Property, Plant Equipment

Filters