Question 1

In respect to the intragroup services, any profit or loss is regarded as:

Accepted Answer

A)  unrealised. 
B)  immediately realised. 
C)  insignificant and so not adjusted on consolidation. 
D)  extraordinary and so ignored for consolidation reporting purposes. 
A)  unrealised. 
B)  immediately realised. 
C)  insignificant and so not adjusted on consolidation. 
D)  extraordinary and so ignored for consolidation reporting purposes.

Question 2

Parsley Limited owns 90% of the share capital of Sage Limited. Sage Limited paid a dividend of $60 000 during the financial period. The NCI adjustment entries in the consolidation worksheet for the dividend include:

Accepted Answer

A)  DR NCI $6 000. 
B)  DR Dividend revenue $6 000. 
C)  DR Dividend paid $6 000. 
D)  DR Dividend payable $6 000. 
A)  DR NCI $6 000. 
B)  DR Dividend revenue $6 000. 
C)  DR Dividend paid $6 000. 
D)  DR Dividend payable $6 000.

Question 3

For an intragroup transaction to require an adjustment to the calculation of the non-controlling interest share of equity it must have which of the following characteristics?
I. The transaction must result in the subsidiary recording a profit or a loss.
II. After the transaction, the other party (not the party holding the non-controlling interest) must have on hand an asset on which unrealised profit is accrued.
III. The initial consolidation adjustment must affect both the statement of financial position and statement of comprehensive income.

Accepted Answer

A)  I and II only. 
B)  II and III only. 
C)  I, II and III. 
D)  None of the above. 
A)  I and II only. 
B)  II and III only. 
C)  I, II and III. 
D)  None of the above.

Question 4

Graham Limited acquired 90% of the share capital and reserves of Terry Limited for $340,000. Share capital was $100 000 and reserves amounted to $124 000. All assets and liabilities were recorded at fair value except equipment which was recorded at $60 000 below fair value. The company tax rate was 30%. The partial goodwill method is adopted by the group. The amount of goodwill acquired by Graham Limited in this business combination was:

Accepted Answer

A)  $5 600 
B)  $10 000 
C)  $10 600 
D)  $26 000 
A)  $5 600 
B)  $10 000 
C)  $10 600 
D)  $26 000

Question 5

In accordance with the AASB 12 Disclosure of Interests in Other Entities, which of the following information relating to the NCI is not required to be disclosed?

Accepted Answer

A)  The profit or loss allocated to NCI of the subsidiary during the reporting period. 
B)  The proportion of ownership interests held by NCI. 
C)  The total number of shares owned by the NCI. 
D)  The name of the subsidiary. 
A)  The profit or loss allocated to NCI of the subsidiary during the reporting period. 
B)  The proportion of ownership interests held by NCI. 
C)  The total number of shares owned by the NCI. 
D)  The name of the subsidiary.

Question 6

Maddie Ltd holds 80% interest in Emily Ltd. Emily Ltd sells inventory to Maddie Ltd during the year for $15 000. The inventories originally cost $13 000 when purchased from an external party. At the end of the year all inventories are still on hand, but were sold by the end of the next period. The tax rate is 30%. The NCI adjustment required in relation to this intragroup transaction at the end of the next period is a credit to Retained earnings (opening balance) of:

Accepted Answer

A)  Nil. 
B)  $1400 
C)  $2000 
D)  $280 
A)  Nil. 
B)  $1400 
C)  $2000 
D)  $280

Question 7

A non-controlling interest in the net assets of a subsidiary consists of the amount of those non-controlling interests at the date of the business combination:

Accepted Answer

A)  less 100% of any post-acquisition dividends paid. 
B)  less the parent's share of any post-acquisition dividends paid or declared. 
C)  less the non-controlling proportionate share of increases in the subsidiary's equity since the business combination. 
D)  plus the non-controlling proportionate share of the changes in the subsidiary's equity since the business combination. 
A)  less 100% of any post-acquisition dividends paid. 
B)  less the parent's share of any post-acquisition dividends paid or declared. 
C)  less the non-controlling proportionate share of increases in the subsidiary's equity since the business combination. 
D)  plus the non-controlling proportionate share of the changes in the subsidiary's equity since the business combination.

Question 8

During the previous year, a partly-owned subsidiary made a transfer from retained earnings to a general reserve. In the current year, which of the following lines would appear in the NCI journal relating to the previous year's transfer?

Accepted Answer

A)  DR NCI. 
B)  CR Retained earnings. 
C)  DR General reserve. 
D)  CR Transfer to general reserve. 
A)  DR NCI. 
B)  CR Retained earnings. 
C)  DR General reserve. 
D)  CR Transfer to general reserve.

Question 9

According to AASB 10 Consolidated Financial Statements, the term 'non-controlling interest' means:

Accepted Answer

A)  equity in a subsidiary not attributable, directly or indirectly, to a parent. 
B)  the total equity of the combined group. 
C)  the equity in the parent entity other than the portion owned by the subsidiary entity. 
D)  the equity in the economic entity other than that which can be attributed to the subsidiary entity. 
A)  equity in a subsidiary not attributable, directly or indirectly, to a parent. 
B)  the total equity of the combined group. 
C)  the equity in the parent entity other than the portion owned by the subsidiary entity. 
D)  the equity in the economic entity other than that which can be attributed to the subsidiary entity.

Question 10

Which of the following is not an effect of choosing the partial goodwill method over the full goodwill method?

Accepted Answer

A)  There will be differences in the reported amounts at acquisition date in the consolidated statements. 
B)  It is more costly to measure the NCI under the partial goodwill method. 
C)  Where the parent acquires some or all of NCI after obtaining control, there will be a higher impact on equity attributable to the parent shareholders. 
D)  The impairment test on goodwill after acquisition will be more complex under the partial goodwill method. 
A)  There will be differences in the reported amounts at acquisition date in the consolidated statements. 
B)  It is more costly to measure the NCI under the partial goodwill method. 
C)  Where the parent acquires some or all of NCI after obtaining control, there will be a higher impact on equity attributable to the parent shareholders. 
D)  The impairment test on goodwill after acquisition will be more complex under the partial goodwill method.

Question 11

If a gain on bargain purchase arises on a business combination, the non-controlling interest:

Accepted Answer

A)  receives no share of the gain. 
B)  is allocated 100% of the gain. 
C)  is entitled to a proportionate share of the gain based on its level of share ownership. 
D)  receives a proportionate share of the gain after adjustments for tax effects have been made. 
A)  receives no share of the gain. 
B)  is allocated 100% of the gain. 
C)  is entitled to a proportionate share of the gain based on its level of share ownership. 
D)  receives a proportionate share of the gain after adjustments for tax effects have been made.

Question 12

Changes in equity in the previous periods up to the beginning of the current period that must be identified for the step 2 NCI entry do not include:

Accepted Answer

A)  transfers to/from reserves. 
B)  changes in share capital. 
C)  dividends paid/declared. 
D)  changes in retained earnings, adjusted for the impact of BCVR entries on the opening balance of retained earnings. 
A)  transfers to/from reserves. 
B)  changes in share capital. 
C)  dividends paid/declared. 
D)  changes in retained earnings, adjusted for the impact of BCVR entries on the opening balance of retained earnings.

Question 13

A non-controlling interest in a subsidiary entity is entitled to a share of which of the following items? $$\begin{array} { | l | c | c | c | c | } 
\hline & \text { I } & \text { II } & \text { III } & \text { IV } \
\hline \begin{array} { l } 
\text { Subsidiary's equity at acquisition } \
\text { date }
\end{array} & \text { Yes } & \text { Yes } & \text { Yes } & \text { Yes } \
\hline \begin{array} { l } 
\text { Chariges in the subsidiary's equity } \
\text { since acquisition date }
\end{array} & \text { Yes } & \text { No } & \text { No } & \text { Yes } \
\hline \begin{array} { l } 
\text { Chariges in the subsidiary's equity of } \
\text { the curent period }
\end{array} & \text { Yes } & \text { Yes } & \text { No } & \text { No } \
\hline
\end{array}$$

Accepted Answer

A)  I. 
B)  II. 
C)  III. 
D)  IV. 
A)  I. 
B)  II. 
C)  III. 
D)  IV.

Question 14

Under the full goodwill method:

Accepted Answer

A)  acquired goodwill consists of both goodwill of the subsidiary and the premium paid by the parent to acquire control over the subsidiary. 
B)  the NCI is measured at the NCI's proportionate share of the acquiree's identifiable assets and liabilities. 
C)  the NCI does not get a share of any equity relating to goodwill. 
D)  only goodwill acquired by parent entity will be recognised. 
A)  acquired goodwill consists of both goodwill of the subsidiary and the premium paid by the parent to acquire control over the subsidiary. 
B)  the NCI is measured at the NCI's proportionate share of the acquiree's identifiable assets and liabilities. 
C)  the NCI does not get a share of any equity relating to goodwill. 
D)  only goodwill acquired by parent entity will be recognised.

Question 15

Ryan Limited acquired 80% of the shares in Tully Limited for $165 000. At acquisition date, share capital in Tully was $120 000 and reserves amounted to $40 000. All assets and liabilities of Tully were recorded at fair value at acquisition date except machinery which was recorded at $20 000 below fair value. The fair value of the NCI at the date of Ryan's acquisition was $40 000 and the full goodwill method is adopted by the group. If the company tax rate was 30%, the total amount of goodwill recorded in relation to this business combination amounts to:

Accepted Answer

A)  $5 000 
B)  $31 000 
C)  $26 000 
D)  $25 000 
A)  $5 000 
B)  $31 000 
C)  $26 000 
D)  $25 000

Question 16

Ryan Ltd holds a 75% interest in Tully Ltd. On 30 June 2021 Tully Ltd transferred a depreciable non-current asset to Ryan Ltd at a profit of $15 000. The remaining useful life of the asset at the date of transfer was 5 years and the tax rate is 30%. The impact of the above transaction on the NCI share of profit at 30 June 2021 is:

Accepted Answer

A)  an increase of $2 625 
B)  an increase of $3 750 
C)  a decrease of $2 625 
D)  a decrease of $3 750 
A)  an increase of $2 625 
B)  an increase of $3 750 
C)  a decrease of $2 625 
D)  a decrease of $3 750

Question 17

Ryan Ltd holds a 75% interest in Tully Ltd. On 1 July 2021, Tully Ltd transferred a depreciable non-current asset to Ryan Ltd at a profit of $15 000. The remaining useful life of the asset at the date of transfer was 5 years and the tax rate is 30%. The impact of the above transaction on the NCI share of profit for the year ended 30 June 2022 is:

Accepted Answer

A)  an increase of $3 000 
B)  an increase of $2 100 
C)  a decrease of $3 000 
D)  a decrease of $2 100 
A)  an increase of $3 000 
B)  an increase of $2 100 
C)  a decrease of $3 000 
D)  a decrease of $2 100

Question 18

When presenting a consolidated statement of financial position the non-controlling interest is:

Accepted Answer

A)  presented as a separate component of total assets and total liabilities. 
B)  presented separately within the non-current liability section. 
C)  presented separately within the equity section. 
D)  shown as a separate portion of net assets. 
A)  presented as a separate component of total assets and total liabilities. 
B)  presented separately within the non-current liability section. 
C)  presented separately within the equity section. 
D)  shown as a separate portion of net assets.

Question 19

A non-controlling interest contributes to a consolidated group?

Accepted Answer

A)  assets 
B)  profit 
C)  equity 
D)  liabilities 
A)  assets 
B)  profit 
C)  equity 
D)  liabilities

Question 20

Changes in equity in the current period that must be identified for the step 3 NCI entry include:

Accepted Answer

A)  dividends paid/declared. 
B)  transfers to/from reserves. 
C)  profit/(loss) earned, adjusted for the impact of BCVR entries on the current profit. 
D)  all of these options. 
A)  dividends paid/declared. 
B)  transfers to/from reserves. 
C)  profit/(loss) earned, adjusted for the impact of BCVR entries on the current profit. 
D)  all of these options.

Exam 29: Consolidation: Non-Controlling Interest

In respect to the intragroup services, any profit or loss is regarded as:

Parsley Limited owns 90% of the share capital of Sage Limited. Sage Limited paid a dividend of $60 000 during the financial period. The NCI adjustment entries in the consolidation worksheet for the dividend include:

In accordance with the AASB 12 Disclosure of Interests in Other Entities, which of the following information relating to the NCI is not required to be disclosed?

A non-controlling interest in the net assets of a subsidiary consists of the amount of those non-controlling interests at the date of the business combination:

During the previous year, a partly-owned subsidiary made a transfer from retained earnings to a general reserve. In the current year, which of the following lines would appear in the NCI journal relating to the previous year's transfer?

According to AASB 10 Consolidated Financial Statements, the term 'non-controlling interest' means:

Which of the following is not an effect of choosing the partial goodwill method over the full goodwill method?

If a gain on bargain purchase arises on a business combination, the non-controlling interest:

Changes in equity in the previous periods up to the beginning of the current period that must be identified for the step 2 NCI entry do not include:

Under the full goodwill method:

When presenting a consolidated statement of financial position the non-controlling interest is:

A non-controlling interest contributes to a consolidated group?

Changes in equity in the current period that must be identified for the step 3 NCI entry include:

Accounting Regulation and the Conceptual Framework

Application of Accounting Theory

Fair Value Measurement

Inventories

Property, Plant and Equipment

Intangible Assets

Impairment of Assets

Provisions, Contingent Liabilities and Contingent Assets

Employee Benefits

Leases

Financial Instruments

Income Taxes

Share Capital and Reserves

Share Based Payment

Revenue

Presentation of Financial Statements

Statement of Cash Flows

Accounting Policies and Other Disclosures

Earnings Per Share

Operating Segments

Related Party Disclosures

Sustainability and Corporate Social Responsibility Recording

Foreign Currency Transactions and Forward Exchange Contracts

Translation of Foreign Currency Financial Statements

Business Combinations

Consolidation: Controlled Entities

Consolidation: Wholly Owned Entities

Consolidation: Intragroup Transactions

Consolidation: Other Issues

Associates and Joint Ventures

Joint Arrangements

Insolvency and Liquidation

Accounting for Mineral Resources

Agriculture

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