Question 1

The 'Transfer from business combination valuation reserve' is an appropriation item that is closed to retained earnings at the end of each year.

Accepted Answer

A) True 
 B)False  True

Question 2

According to AASB 127/IAS 27 Separate Financial Statements, all dividends paid or payable by the subsidiary to a parent are recognised as revenue in the profit or loss of the parent.

Accepted Answer

A) True 
 B)False  True

Question 3

Susan Limited has two subsidiary entities, Rachel Limited and Rebecca Limited. Susan Limited owns 100% of the shares in both entities. Details of the cash accounts of each company are: Susan Limited $200 000, Rachel Limited $60 000, Rebecca Limited $30 000. The balance of the consolidated cash account of the Susan Limited group is:

Accepted Answer

A)  $290 000. 
B)  $200 000. 
C)  $260 000. 
D)  $230 000. 
A)  $290 000. 
B)  $200 000. 
C)  $260 000. 
D)  $230 000. A

Question 4

If the fair value of a depreciable asset is greater than the carrying amount, in the years subsequent to the acquisition date the depreciation expense recorded in the books of the subsidiary will be greater than that for the group.

Accepted Answer

A) True 
 B)False

Question 5

AASB 3/IFRS 3 Business Combinations prohibits the revaluation of the assets of the subsidiary at acquisition date in the records of the subsidiary.

Accepted Answer

A) True 
 B)False

Question 6

In relation to pre-acquisition of a subsidiary entity, which of the following events can cause a change in the pre-acquisition entry subsequent to acquisition date? I Transfers to post-acquisition retained earnings.
II Depreciation on non-current assets.
III Transfers from pre-acquisition retained earnings.
IV Bonus dividends paid from pre-acquisition equity.

Accepted Answer

A)  I, II, III and IV 
B)  I, III and IV only 
C)  II and III only 
D)  III and IV only 
A)  I, II, III and IV 
B)  I, III and IV only 
C)  II and III only 
D)  III and IV only

Question 7

AASB 12/IFRS 12 Disclosure of Interests in Other Entities establishes the disclosures relating to a parent's interests in subsidiaries

Accepted Answer

A) True 
 B)False

Question 8

Where at acquisition date the parent holds shares in the subsidiary that it has previously acquired, this investment must be revalued to fair value at acquisition date.

Accepted Answer

A) True 
 B)False

Question 9

Hungry Limited acquired 100% of the share capital of Jane Limited for a purchase consideration of $320 000. At acquisition date, the net fair value of Jane Ltd's assets, liabilities and contingent liabilities was $250 000 including goodwill with a carrying amount of $20 000. The company tax rate is 30%. The unrecorded amount of goodwill that must be recognised on the consolidation worksheet is:

Accepted Answer

A)  $50 000. 
B)  $70 000. 
C)  $90 000. 
D)  $15 000. 
A)  $50 000. 
B)  $70 000. 
C)  $90 000. 
D)  $15 000.

Question 10

Water Limited acquired Boy Limited for a purchase consideration of $110 000. At acquisition date the fair value of the Boy Limited's Land asset was $80 000 and the carrying amount was $60 000. If the company tax rate is 30%, which of the following is the appropriate adjustment to recognise the tax effect of the business combination revaluation of land?

Accepted Answer

A)  DR Deferred tax liability $6 000 
B)  CR Deferred tax liability $6 000 
C)  DR Deferred tax asset $6 000 
D)  CR Deferred tax asset $6 000 
A)  DR Deferred tax liability $6 000 
B)  CR Deferred tax liability $6 000 
C)  DR Deferred tax asset $6 000 
D)  CR Deferred tax asset $6 000

Question 11

Easts Limited acquired 100% of the shares in Tigers Limited on a cum div. basis for $200 000. At acquisition date, the subsidiary had a declared dividend of $10 000. The pre-acquisition entry must include the following line:

Accepted Answer

A)  DR Shares in subsidiary $190 000 
B)  CR Shares in subsidiary $200 000 
C)  CR Shares in subsidiary $190 000 
D)  CR Shares in subsidiary $10 000 
A)  DR Shares in subsidiary $190 000 
B)  CR Shares in subsidiary $200 000 
C)  CR Shares in subsidiary $190 000 
D)  CR Shares in subsidiary $10 000

Question 12

A post acquisition transfer between retained earnings and a general reserve will result in a corresponding change to the pre-acquisition entry.

Accepted Answer

A) True 
 B)False

Question 13

The preparation of consolidated financial statements involves:

Accepted Answer

A)  adding together the financial statements of the investor and the associate. 
B)  adjusting entries in the accounting records of the subsidiary. 
C)  adding together the financial statements of the parent and the subsidiaries. 
D)  adjusting entries in the accounting records of the parent. 
A)  adding together the financial statements of the investor and the associate. 
B)  adjusting entries in the accounting records of the subsidiary. 
C)  adding together the financial statements of the parent and the subsidiaries. 
D)  adjusting entries in the accounting records of the parent.

Question 14

At the date of acquisition, a subsidiary had recorded a dividend payable of $100 000. Assuming that the shares were acquired on a cum. div basis, the consolidation adjustment needed at the date of acquisition to eliminate the dividend is:

Accepted Answer

A)  DR Dividend payable $100 000 CR Dividend receivable $100 000 
B)  DR Dividend revenue $100 000 CR Dividend declared $100 000 
C)  DR Shares in subsidiary $100 000 CR Dividend receivable $100 000 
D)  DR Dividend receivable $100 000 CR Dividend payable $100 000 
A)  DR Dividend payable $100 000 CR Dividend receivable $100 000 
B)  DR Dividend revenue $100 000 CR Dividend declared $100 000 
C)  DR Shares in subsidiary $100 000 CR Dividend receivable $100 000 
D)  DR Dividend receivable $100 000 CR Dividend payable $100 000

Question 15

Consolidated financial statements must be prepared using uniform accounting policies for like transactions and other events in similar circumstances.

Accepted Answer

A) True 
 B)False

Question 16

Business combination valuation adjustment entries record only the parent's share of fair value adjustments relating to a subsidiary's assets, liabilities and contingent liabilities.

Accepted Answer

A) True 
 B)False

Question 17

If the consideration transferred is greater than the acquired interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree:

Accepted Answer

A)  a gain on bargain purchase results. 
B)  goodwill has been purchased and must be recognised on consolidation. 
C)  the difference is treated as a special equity reserve in the acquirer's accounting records. 
D)  the difference is immediately charged to profit or loss in the period in which the business combination occurred. 
A)  a gain on bargain purchase results. 
B)  goodwill has been purchased and must be recognised on consolidation. 
C)  the difference is treated as a special equity reserve in the acquirer's accounting records. 
D)  the difference is immediately charged to profit or loss in the period in which the business combination occurred.

Question 18

Kerri Limited has two subsidiary entities, Emily Limited and Georgia Limited. Kerri Limited owns 100% of the shares in both entities. Details of the issued share capital are: - Kerri Limited $200 000
- Emily Limited $60 000
- Georgia Limited $30 000
The consolidated share capital amount of the Kerri Emily Georgia group is:

Accepted Answer

A)  $230 000. 
B)  $90 000. 
C)  $200 000. 
D)  $290 000. 
A)  $230 000. 
B)  $90 000. 
C)  $200 000. 
D)  $290 000.

Question 19

The acquisition analysis may result in the recognition of assets and liabilities that are not recognised in the subsidiary's accounting records.

Accepted Answer

A) True 
 B)False

Question 20

The effect of the pre-acquisition entry is to eliminate the 'Shares in subsidiary' asset and the:

Accepted Answer

A)  equity of the subsidiary at the acquisition date. 
B)  equity of the parent at the acquisition date. 
C)  net assets of the subsidiary at the acquisition date. 
D)  net assets of the parent at the acquisition date. 
A)  equity of the subsidiary at the acquisition date. 
B)  equity of the parent at the acquisition date. 
C)  net assets of the subsidiary at the acquisition date. 
D)  net assets of the parent at the acquisition date.

The 'Transfer from business combination valuation reserve' is an appropriation item that is closed to retained earnings at the end of each year.

According to AASB 127/IAS 27 Separate Financial Statements, all dividends paid or payable by the subsidiary to a parent are recognised as revenue in the profit or loss of the parent.

If the fair value of a depreciable asset is greater than the carrying amount, in the years subsequent to the acquisition date the depreciation expense recorded in the books of the subsidiary will be greater than that for the group.

AASB 3/IFRS 3 Business Combinations prohibits the revaluation of the assets of the subsidiary at acquisition date in the records of the subsidiary.

AASB 12/IFRS 12 Disclosure of Interests in Other Entities establishes the disclosures relating to a parent's interests in subsidiaries

Where at acquisition date the parent holds shares in the subsidiary that it has previously acquired, this investment must be revalued to fair value at acquisition date.

Easts Limited acquired 100% of the shares in Tigers Limited on a cum div. basis for $200 000. At acquisition date, the subsidiary had a declared dividend of $10 000. The pre-acquisition entry must include the following line:

A post acquisition transfer between retained earnings and a general reserve will result in a corresponding change to the pre-acquisition entry.

The preparation of consolidated financial statements involves:

At the date of acquisition, a subsidiary had recorded a dividend payable of $100 000. Assuming that the shares were acquired on a cum. div basis, the consolidation adjustment needed at the date of acquisition to eliminate the dividend is:

Consolidated financial statements must be prepared using uniform accounting policies for like transactions and other events in similar circumstances.

Business combination valuation adjustment entries record only the parent's share of fair value adjustments relating to a subsidiary's assets, liabilities and contingent liabilities.

If the consideration transferred is greater than the acquired interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree:

The acquisition analysis may result in the recognition of assets and liabilities that are not recognised in the subsidiary's accounting records.

The effect of the pre-acquisition entry is to eliminate the 'Shares in subsidiary' asset and the:

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: Intragroup Transactions

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 10: Consolidation: Wholly Owned Subsidiaries

The 'Transfer from business combination valuation reserve' is an appropriation item that is closed to retained earnings at the end of each year.

According to AASB 127/IAS 27 Separate Financial Statements, all dividends paid or payable by the subsidiary to a parent are recognised as revenue in the profit or loss of the parent.

If the fair value of a depreciable asset is greater than the carrying amount, in the years subsequent to the acquisition date the depreciation expense recorded in the books of the subsidiary will be greater than that for the group.

AASB 3/IFRS 3 Business Combinations prohibits the revaluation of the assets of the subsidiary at acquisition date in the records of the subsidiary.

AASB 12/IFRS 12 Disclosure of Interests in Other Entities establishes the disclosures relating to a parent's interests in subsidiaries

Where at acquisition date the parent holds shares in the subsidiary that it has previously acquired, this investment must be revalued to fair value at acquisition date.

Easts Limited acquired 100% of the shares in Tigers Limited on a cum div. basis for $200 000. At acquisition date, the subsidiary had a declared dividend of $10 000. The pre-acquisition entry must include the following line:

A post acquisition transfer between retained earnings and a general reserve will result in a corresponding change to the pre-acquisition entry.

The preparation of consolidated financial statements involves:

At the date of acquisition, a subsidiary had recorded a dividend payable of $100 000. Assuming that the shares were acquired on a cum. div basis, the consolidation adjustment needed at the date of acquisition to eliminate the dividend is:

Consolidated financial statements must be prepared using uniform accounting policies for like transactions and other events in similar circumstances.

Business combination valuation adjustment entries record only the parent's share of fair value adjustments relating to a subsidiary's assets, liabilities and contingent liabilities.

If the consideration transferred is greater than the acquired interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree:

The acquisition analysis may result in the recognition of assets and liabilities that are not recognised in the subsidiary's accounting records.

The effect of the pre-acquisition entry is to eliminate the 'Shares in subsidiary' asset and the:

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: Intragroup Transactions

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