Fish Ltd acquired an 80 per cent interest in Chips Ltd on 1 July 2013 for a cash consideration of $838 000.At that date the fair value of the net assets of Chips Ltd was represented by: \[\begin{array} { | l | r | } \hline \text { Share capital } & 560000 \\ \hline \text { Asset revaluation reserve } & 90000 \\ \hline \text { Retained earnings } & \underline{360000} \\ \hline & \underline{1010000} \\ \hline \end{array}\] On 30 June 2015 Fish Ltd sold all its shares in Chips Ltd for $950 000.At this date the fair value of the net assets of Chips Ltd was represented by: \[\begin{array} { | l | r | } \hline \text { Share capital } & 560000 \\ \hline \text { Asset revaluation reserve } & 120000 \\ \hline \text { Retained earnings } & \underline { 490000 } \\ \hline & \underline { 1170000 } \\ \hline \end{array}\] The retained earnings of $490 000 includes operating profit after tax of $90 000 from the current period.Impairment of goodwill was assessed at $6000,the impairment having been incurred evenly across the last two years.The investment has not been marked to market during the period that the shares were held.What is the elimination entry required for the consolidated accounts?

A) \[\begin{array} { | l | l | r | r | } \hline \mathrm { Dr } & \text { Operating profit after tax } & 69600 & \\ \hline \mathrm { Dr } & \text { Retained earnings } & 29600 & \\ \hline \mathrm { Dr } & \text { Asset revaluation reserve } & 24000 & \\ \hline \mathrm { Cr } & \text { Profit on sale of investment } & & 112000 \\ \hline \mathrm { Cr } & \text { Profit on sale of subsidiary } & & 11200 \\ \hline \end{array}\] B) \[\begin{array} { | l | l | r | r | } \hline \mathrm { Dr } & \text { Profit on sale of investment } & 112000 & \\ \hline \mathrm { Dr } & \text { Loss on sale of subsidiary } & 10000 & \\ \hline \mathrm { Cr } & \text { Operating profit after tax } & & 69000 \\ \hline \mathrm { Cr } & \text { Retained earnings } & & 29000 \\ \hline \mathrm { Cr } & \text { Asset revaluation reserve } & & 24000 \\ \hline \end{array}\] C) \[\begin{array} { | l | l | r | r | } \hline \mathrm { Dr } & \text { Operating profit after tax } & 69600 & \\ \hline \mathrm { Dr } & \text { Retained earnings } & 29600 & \\ \hline \mathrm { Dr } & \text { Asset revaluation reserve } & 24000 & \\ \hline \mathrm { Dr } & \text { Loss on sale of subsidiary } & 18800 & \\ \hline \mathrm { Cr } & \text { Profit on sale of investment } & & 142000 \\ \hline \end{array}\] D) \[\begin{array} { | l | l | r | r | } \hline \mathrm { Dr } & \text { Profit on sale of investment } & 142000 & \\ \hline \mathrm { Cr } & \text { Profit on sale of subsidiary } & & 20000 \\ \hline \mathrm { Cr } & \text { Operating profit after tax } & & 69000 \\ \hline \mathrm { Cr } & \text { Retained earnings } & & 29000 \\ \hline \mathrm { Cr } & \text { Asset revaluation reserve } & & 24000 \\ \hline \end{array}\] A) \[\begin{array} { | l | l | r | r | } \hline \mathrm { Dr } & \text { Operating profit after tax } & 69600 & \\ \hline \mathrm { Dr } & \text { Retained earnings } & 29600 & \\ \hline \mathrm { Dr } & \text { Asset revaluation reserve } & 24000 & \\ \hline \mathrm { Cr } & \text { Profit on sale of investment } & & 112000 \\ \hline \mathrm { Cr } & \text { Profit on sale of subsidiary } & & 11200 \\ \hline \end{array}\] B) \[\begin{array} { | l | l | r | r | } \hline \mathrm { Dr } & \text { Profit on sale of investment } & 112000 & \\ \hline \mathrm { Dr } & \text { Loss on sale of subsidiary } & 10000 & \\ \hline \mathrm { Cr } & \text { Operating profit after tax } & & 69000 \\ \hline \mathrm { Cr } & \text { Retained earnings } & & 29000 \\ \hline \mathrm { Cr } & \text { Asset revaluation reserve } & & 24000 \\ \hline \end{array}\] C) \[\begin{array} { | l | l | r | r | } \hline \mathrm { Dr } & \text { Operating profit after tax } & 69600 & \\ \hline \mathrm { Dr } & \text { Retained earnings } & 29600 & \\ \hline \mathrm { Dr } & \text { Asset revaluation reserve } & 24000 & \\ \hline \mathrm { Dr } & \text { Loss on sale of subsidiary } & 18800 & \\ \hline \mathrm { Cr } & \text { Profit on sale of investment } & & 142000 \\ \hline \end{array}\] D) \[\begin{array} { | l | l | r | r | } \hline \mathrm { Dr } & \text { Profit on sale of investment } & 142000 & \\ \hline \mathrm { Cr } & \text { Profit on sale of subsidiary } & & 20000 \\ \hline \mathrm { Cr } & \text { Operating profit after tax } & & 69000 \\ \hline \mathrm { Cr } & \text { Retained earnings } & & 29000 \\ \hline \mathrm { Cr } & \text { Asset revaluation reserve } & & 24000 \\ \hline \end{array}\]

The following consolidation adjusting journal entries appeared at the end of a period in which the parent sold all of its shareholding in a subsidiary.It received $1 200 000 for the shares. \[\begin{array} { | l | l | r | r | } \hline \mathrm { Dr } & \text { Profit on sale of investment } & 500000 & \\ \hline \mathrm { Dr } & \text { Loss on sales of subsidiary } & 250000 & \\ \hline \mathrm { Cr } & \text { Profit after tax } & & 179000 \\ \hline \mathrm { Cr } & \text { Retained earnings } & & 271000 \\ \hline \mathrm { Cr } & \text { Revaluation reserve } & & 300000 \\ \hline \end{array}\] The amount of the share of post-acquisition profits and movements in equity balances,contributed to the group by the subsidiary,and attributable to the parent,is:

A) ($250 000) B) $350 000 C) $750 000 D) $1 200 000 A) ($250 000) B) $350 000 C) $750 000 D) $1 200 000

Star Trek Ltd acquires shares in Vulcan Ltd at various stages summarised as follows: \[\begin{array} { | l | l | l | } \hline \text { Date } & \begin{array} { l } \text { Percentage of interest } \\ \text { acquired in Vulcan Ltd } \end{array} & \begin{array} { l } \text { Relationship of Star Trek with } \\ \text { Vulcan Ltd } \end{array} \\ \hline 30 \text { June } 2015 & 25 \% & \text { Associate } \\ \hline \text { 30 June } 2016 & 35 \% & \text { Subsidiary } \\ \hline \text { 30 June } 2017 & 10 \% & \text { Subsidiary } \\ \hline \end{array}\] Which of the following statements is not in accordance with AASB 10 Consolidated Financial Statements?

A) Recognise goodwill (bargain gain on purchase) on the acquisition of shares purchased in 2016 and 2017 on consolidation of financial statements for the year 2016 and 2017, respectively, when Star Trek Ltd has control of Vulcan Ltd. B) Recognise goodwill (bargain gain on purchase) on acquisition of shares made in 2016, when Star Trek Ltd ultimately gained control of the equity of Vulcan Ltd. C) Difference between purchase consideration and net identifiable assets of Vulcan Ltd for share interests acquired in 2017 is taken to equity. D) Star Trek Ltd should recognise goodwill using single-date method. A) Recognise goodwill (bargain gain on purchase) on the acquisition of shares purchased in 2016 and 2017 on consolidation of financial statements for the year 2016 and 2017, respectively, when Star Trek Ltd has control of Vulcan Ltd. B) Recognise goodwill (bargain gain on purchase) on acquisition of shares made in 2016, when Star Trek Ltd ultimately gained control of the equity of Vulcan Ltd. C) Difference between purchase consideration and net identifiable assets of Vulcan Ltd for share interests acquired in 2017 is taken to equity. D) Star Trek Ltd should recognise goodwill using single-date method.

Exam 30: Further Consolidation Issues IV: Accounting for Changes in the Degree of Ownership of a Subsidiary

When a parent sells its interest in a subsidiary,any profit or loss generated by the subsidiary:

(Multiple Choice)

4.9/5

(36)

Question 21

Fish Ltd acquired an 80 per cent interest in Chips Ltd on 1 July 2013 for a cash consideration of $838 000.At that date the fair value of the net assets of Chips Ltd was represented by: Share capital 560000 Asset revaluation reserve 90000 Retained earnings On 30 June 2015 Fish Ltd sold all its shares in Chips Ltd for $950 000.At this date the fair value of the net assets of Chips Ltd was represented by: Share capital 560000 Asset revaluation reserve 120000 Retained earnings The retained earnings of $490 000 includes operating profit after tax of $90 000 from the current period.Impairment of goodwill was assessed at $6000,the impairment having been incurred evenly across the last two years.The investment has not been marked to market during the period that the shares were held.What is the elimination entry required for the consolidated accounts?

(Multiple Choice)

4.9/5

(39)

Question 22

Provide reasons for not recognising any gain or loss on subsequent changes in ownership after control has been achieved as outlined in the Basis for Conclusions that accompanied the release of IFRS 10 Consolidated Financial Statements.

(Essay)

4.9/5

(33)

Question 23

Control over a subsidiary may be lost without a change in absolute or relative ownership levels.An example of this is loss of control to a court administrator as a result of bankruptcy.

(True/False)

4.9/5

(38)

Question 24

Spock Ltd acquired a 10 per cent holding in Kirk Ltd on 1 July 2017 for $350 000 cash,being the fair value of consideration transferred. On 30 June 2018,Spock Ltd acquired a further 75 per cent of the contributed capital of Kirk Ltd for $3 300 000,which represents the fair value of consideration transferred.After the latest acquisition,Spock Ltd gained control of Kirk Ltd.The fair value of the net assets acquired and the liabilities assumed of Kirk Ltd at the acquisition date of 30 June 2018 was $3 500 000 and all assets were recorded at far value in the financial statements of Kirk Ltd. Goodwill is also attributed to the non-controlling interest. Based on the above information,which of the following accounting treatments is not in accordance with AASB 10?

(Multiple Choice)

4.8/5

(31)

Question 25

When additional shares in a subsidiary are acquired,AASB 10 requires each acquisition to be accounted for separately.

(True/False)

4.8/5

(39)

Question 26

The following consolidation adjusting journal entries appeared at the end of a period in which the parent sold all of its shareholding in a subsidiary.It received $1 200 000 for the shares. Profit on sale of investment 500000 Loss on sales of subsidiary 250000 Profit after tax 179000 Retained earnings 271000 Revaluation reserve 300000 The amount of the share of post-acquisition profits and movements in equity balances,contributed to the group by the subsidiary,and attributable to the parent,is:

(Multiple Choice)

4.8/5

(36)

Question 27

Discuss the accounting treatment for the current year's profit and loss earned by the subsidiary from the start of the financial period to the date the parent loses control of this subsidiary.

(Essay)

4.9/5

(35)

Question 28

In a business combination achieved in stages,the acquirer shall re-measure its previously held equity interest in the acquiree at its acquisition-date fair value and recognise the resulting gain or loss,if any,in equity.

(True/False)

4.9/5

(29)

Question 29

Under the single-date method goodwill would be recognised:

(Multiple Choice)

4.9/5

(33)

Question 30

Star Trek Ltd acquires shares in Vulcan Ltd at various stages summarised as follows: Date Percentage of interest acquired in Vulcan Ltd Relationship of Star Trek with Vulcan Ltd 30 June 2015 25\% Associate 30 June 2016 35\% Subsidiary 30 June 2017 10\% Subsidiary Which of the following statements is not in accordance with AASB 10 Consolidated Financial Statements?

(Multiple Choice)

4.9/5

(41)

Question 31

The profit or loss on the sale of shares in a subsidiary will be reported in the books of both the parent legal entity and the consolidated accounts.The method of calculating the profit or loss in the consolidated accounts is to:

(Multiple Choice)

4.8/5

(25)

Question 32

When shares in a subsidiary are sold during a period,any income and expenses recorded in the consolidated accounts that relate to the subsidiary are eliminated.

(True/False)

5.0/5

(29)

Question 33

Dolly Ltd acquired a 60 per cent interest in Vardon Ltd on 1 July 2012 for a cash consideration of $1 300 000.At that date fair value of the net assets of Vardon Ltd were represented by: Share capital 1020000 Asset revaluation reserve 150000 Retained earnings On 1 July 2014 Dolly Ltd purchased the final 40 per cent of the issued capital of Vardon Ltd for cash consideration of $950 000.At this date the fair value of the net assets of Vardon Ltd were represented by: Share capital 1020000 Asset revaluation reserve 280000 Retained earnings Impairment of goodwill was assessed at $3000,of which $2000 related to the year ended 30 June 2015.There were no intragroup transactions.What are the consolidation entries to eliminate the investment in the subsidiary and amortise goodwill for the period ended 30 June 2016?

(Multiple Choice)

4.8/5

(36)

Question 34

Discuss what happens when a parent loses control over a subsidiary

(Essay)

4.8/5

(31)

Question 35

Any difference between fair value paid and the carrying amount of the additional interest acquired is:

(Multiple Choice)

4.7/5

(31)

Question 36

An immediate parent entity may purchase shares in its subsidiary in separate transactions with long periods of time between transactions.It is possible that one transaction may give rise to goodwill on consolidation and another to an excess.How would the excess on consolidation be calculated and treated in the consolidated accounts?

(Multiple Choice)

4.7/5

(40)

Question 37

AASB 10 Consolidated Financial Statements prescribes that changes in the parent's ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.

(True/False)

4.7/5

(34)

Question 38

Once control over a subsidiary has been lost,the parent entity must derecognise the individual assets,liabilities and equity including any non-controlling interest relating to that subsidiary.

(True/False)

4.9/5

(41)

Question 39

The consolidated statement of financial position at year end,in a period when the parent sold its interests in a subsidiary:

(Multiple Choice)

4.9/5

(31)

Question 40

Showing 21 - 40 of 49

Exam 30: Further Consolidation Issues IV: Accounting for Changes in the Degree of Ownership of a Subsidiary

When a parent sells its interest in a subsidiary,any profit or loss generated by the subsidiary:

Provide reasons for not recognising any gain or loss on subsequent changes in ownership after control has been achieved as outlined in the Basis for Conclusions that accompanied the release of IFRS 10 Consolidated Financial Statements.

Control over a subsidiary may be lost without a change in absolute or relative ownership levels.An example of this is loss of control to a court administrator as a result of bankruptcy.

When additional shares in a subsidiary are acquired,AASB 10 requires each acquisition to be accounted for separately.

Discuss the accounting treatment for the current year's profit and loss earned by the subsidiary from the start of the financial period to the date the parent loses control of this subsidiary.

In a business combination achieved in stages,the acquirer shall re-measure its previously held equity interest in the acquiree at its acquisition-date fair value and recognise the resulting gain or loss,if any,in equity.

Under the single-date method goodwill would be recognised:

The profit or loss on the sale of shares in a subsidiary will be reported in the books of both the parent legal entity and the consolidated accounts.The method of calculating the profit or loss in the consolidated accounts is to:

When shares in a subsidiary are sold during a period,any income and expenses recorded in the consolidated accounts that relate to the subsidiary are eliminated.

Discuss what happens when a parent loses control over a subsidiary

Any difference between fair value paid and the carrying amount of the additional interest acquired is:

AASB 10 Consolidated Financial Statements prescribes that changes in the parent's ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.

Once control over a subsidiary has been lost,the parent entity must derecognise the individual assets,liabilities and equity including any non-controlling interest relating to that subsidiary.

The consolidated statement of financial position at year end,in a period when the parent sold its interests in a subsidiary:

An Overview of the Australian External Reporting Environment

The Conceptual Framework of Accounting and Its Relevance to Financial Reporting

Theories of Accounting

An Overview of Accounting for Assets

Depreciation of Property, plant and Equipment

Revaluations and Impairment Testing of Non-Current Assets

Inventory

Accounting for Intangibles

Accounting for Heritage Assets and Biological Assets

An Overview of Accounting for Liabilities

Accounting for Leases

Accounting for Employee Benefits

Share Capital and Reserves

Accounting for Financial Instruments

Revenue Recognition Issues

The Statement of Comprehensive Income and Statement of Changes in Equity

Accounting for Share-Based Payments

Accounting for Income Taxes

The Statement of Cash Flows

Accounting for the Extractive Industries

Accounting for General Insurance Contracts

Accounting for Superannuation Plans

Events Occurring After the End of the Reporting Period

Segment Reporting

Related Party Disclosures

Earnings Per Share

Accounting for Group Structures

Further Consolidation Issues I: Accounting for Intragroup Transactions

Further Consolidation Issues II: Accounting for Non-Controlling Interests

Accounting for Equity Investments,including Investments in Associates and Joint Arrangements

Accounting for Foreign Currency Transactions

Translating the Financial Statements of Foreign Operations

Accounting for Corporate Social Responsibility

Filters