Question 1

Pre-acquisition dividends are accounted for in the parent's books as a reduction in the investment in the subsidiary.

Accepted Answer

A) True 
 B)False

Question 2

If an interim dividend is paid by a subsidiary to its parent, the consolidation entry to eliminate the transaction is which of the following?

Accepted Answer

A)  Dr Interim dividend paid; Cr Dividend revenue 
B)  Dr Dividend revenue; Cr Interim dividend paid 
C)  Dr Dividend revenue; Cr Dividend payable 
D)  Dr Interim dividend paid; Cr Cash 
A)  Dr Interim dividend paid; Cr Dividend revenue 
B)  Dr Dividend revenue; Cr Interim dividend paid 
C)  Dr Dividend revenue; Cr Dividend payable 
D)  Dr Interim dividend paid; Cr Cash

Question 3

During the year ended 30 June 2017, a subsidiary sold inventories to its parent at a before-tax profit of $20 000. The inventories originally cost the subsidiary $87 000. At 30 June 2017 all the inventory was still on hand and it was sold to an external party in July 2017. Ignoring tax effects, the consolidation adjustment entry to eliminate this transaction during the year ended 30 June 2018 would include which of the following line items?

Accepted Answer

A)  Dr Cost of sales $20 000 
B)  Cr Cost of sales $20 000 
C)  Dr Cost of sales $87 000 
D)  Cr Cost of sales $87 000 
A)  Dr Cost of sales $20 000 
B)  Cr Cost of sales $20 000 
C)  Dr Cost of sales $87 000 
D)  Cr Cost of sales $87 000

Question 4

When a dividend is declared, but unpaid at the end of a financial year, credit consolidation adjustments are required against both the dividend declared and dividend receivable account.

Accepted Answer

A) True 
 B)False

Question 5

When a non-depreciable non-current asset such as land is sold between entities within a group, the adjustment in relation to any gain or loss recognised on the transfer is carried forward until the asset is disposed of to an external party.

Accepted Answer

A) True 
 B)False

Question 6

Knights Ltd purchased inventories from its subsidiary, Gidley Ltd, for $20 000. The goods originally cost Gidley Ltd $12 000. The company tax rate is 30%. Assuming that all of the inventories were still on hand at the end of the year, which of the following consolidation adjustment entries is required?

Accepted Answer

A)  Dr Tax expense $2400; Cr Deferred tax liability $2400 
B)  Dr Tax expense $2400; Cr Deferred tax asset $2400 
C)  Dr Deferred tax asset $2400; Cr Tax expense $2400 
D)  Dr Deferred tax liability $2400; Cr Tax expense $2400 
A)  Dr Tax expense $2400; Cr Deferred tax liability $2400 
B)  Dr Tax expense $2400; Cr Deferred tax asset $2400 
C)  Dr Deferred tax asset $2400; Cr Tax expense $2400 
D)  Dr Deferred tax liability $2400; Cr Tax expense $2400

Question 7

Ali Ltd sold an item of plant to its subsidiary Baba Ltd on 1 January 2017 for $100 000. The asset had cost Ali Ltd $120 000 when acquired on 1 January 2015. At that time the remaining useful life of the plant was assessed at 5 years. The adjustment necessary on consolidation as at 30 June 2018 in relation to the sale of plant will result in:

Accepted Answer

A)  an increase in retained earnings and a decrease in current year profit. 
B)  a decrease in retained earnings and an increase in current year profit. 
C)  an increase in retained earnings and an increase in current year profit. 
D)  a decrease in retained earnings and a decrease in current year profit. 
A)  an increase in retained earnings and a decrease in current year profit. 
B)  a decrease in retained earnings and an increase in current year profit. 
C)  an increase in retained earnings and an increase in current year profit. 
D)  a decrease in retained earnings and a decrease in current year profit.

Question 8

Elimination consolidation entries relating to intragroup services do not need to be carried forward to future periods.

Accepted Answer

A) True 
 B)False

Question 9

When an entity sells a non-current asset at a profit to another entity within the same group, which of the following adjustments is necessary on consolidation?

Accepted Answer

A)  Dr Asset Cr Cash 
B)  Dr Cash Cr Asset 
C)  Dr Gain on sale Cr Asset 
D)  Dr Asset Cr Gain on sale 
A)  Dr Asset Cr Cash 
B)  Dr Cash Cr Asset 
C)  Dr Gain on sale Cr Asset 
D)  Dr Asset Cr Gain on sale

Question 10

If an entity sells a non-current asset at a profit to another entity within the same group, which of the following consolidation adjustments is necessary to reflect the tax effect?

Accepted Answer

A)  Dr Deferred tax asset 
B)  Dr Deferred tax liability 
C)  Dr Tax expense 
D)  Cr Deferred tax asset 
A)  Dr Deferred tax asset 
B)  Dr Deferred tax liability 
C)  Dr Tax expense 
D)  Cr Deferred tax asset

Pre-acquisition dividends are accounted for in the parent's books as a reduction in the investment in the subsidiary.

If an interim dividend is paid by a subsidiary to its parent, the consolidation entry to eliminate the transaction is which of the following?

When a dividend is declared, but unpaid at the end of a financial year, credit consolidation adjustments are required against both the dividend declared and dividend receivable account.

When a non-depreciable non-current asset such as land is sold between entities within a group, the adjustment in relation to any gain or loss recognised on the transfer is carried forward until the asset is disposed of to an external party.

Elimination consolidation entries relating to intragroup services do not need to be carried forward to future periods.

When an entity sells a non-current asset at a profit to another entity within the same group, which of the following adjustments is necessary on consolidation?

If an entity sells a non-current asset at a profit to another entity within the same group, which of the following consolidation adjustments is necessary to reflect the tax effect?

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: Non-Controlling Interest

Consolidation: Other Issues

Associates and Joint Ventures

Joint Arrangements

Insolvency and Liquidation

Accounting for Company Income Tax

Property, Plant Equipment

Filters

Exam 11: Consolidation: Intragroup Transactions

Pre-acquisition dividends are accounted for in the parent's books as a reduction in the investment in the subsidiary.

If an interim dividend is paid by a subsidiary to its parent, the consolidation entry to eliminate the transaction is which of the following?

When a dividend is declared, but unpaid at the end of a financial year, credit consolidation adjustments are required against both the dividend declared and dividend receivable account.

When a non-depreciable non-current asset such as land is sold between entities within a group, the adjustment in relation to any gain or loss recognised on the transfer is carried forward until the asset is disposed of to an external party.

Elimination consolidation entries relating to intragroup services do not need to be carried forward to future periods.

When an entity sells a non-current asset at a profit to another entity within the same group, which of the following adjustments is necessary on consolidation?

If an entity sells a non-current asset at a profit to another entity within the same group, which of the following consolidation adjustments is necessary to reflect the tax effect?

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: Non-Controlling Interest

Consolidation: Other Issues

Associates and Joint Ventures

Joint Arrangements

Insolvency and Liquidation

Accounting for Company Income Tax

Property, Plant Equipment

Filters