Gouda Ltd acquires all the issued capital of Cheese Ltd for a cash payment of $2 545 000 on 30 June 2015.The statement of financial position of Cheese Ltd at purchase date is: $\begin{array}{|l|r|} \hline &(\$ 000)\\ \hline \text { Assets } & \\ \hline \text { Cash } & 85 \\ \hline \text { Accounts receivable } & 185 \\ \hline \text { Equipment } & 990 \\ \hline \text { Land } & \underline{1285} \\ \hline \text { Total assets } &\underline{ 2545} \\ \hline & \\ \hline \text { Liabilities } & \\ \hline \text { Accounts payable } & 45 \\ \hline \text { Loans } & \underline{500} \\ \hline \text { Total liabilities } & \underline{545} \\ \hline & \\ \hline \text { Shareholders' equity } & \\ \hline \text { Share capital } & 1500 \\ \hline \text { Retained earnings } & \underline{500} \\ \hline \text { Total liabilities and shareholders' funds } &\underline{2545} \\ \hline \end{array}$ Assuming the assets are at fair value,what would be the consolidation entry to eliminate the investment in Cheese Ltd?

A) \[\begin{array} { | c | l | r | r | } \hline & & ( \$ 000 ) & ( \$ 000 ) \\ \hline \mathrm { Dr } & \text { Share capital } & 1500 & \\ \hline \mathrm { Dr } & \text { Retained earnings } & 500 & \\ \hline \mathrm { Dr } & \text { Goodwill } & 545 & \\ \hline \mathrm { Cr } & \text { Investment in Cheese Ltd } & & 2545 \\ \hline \end{array}\] B) \[\begin{array} { | l | l | r | r | } \hline & & ( \$ 000 ) & ( \$ 000 ) \\ \hline \text { Dr } & \text { Investment in Cheese Ltd } & 2545 & \\ \hline \mathrm { Cr } & \text { Share capital } & & 1500 \\ \hline \mathrm { Cr } & \text { Goodwill } & & 1045 \\ \hline \end{array}\] C) \[\begin{array} { | r | l | r | r | } \hline & & ( \$ 000 ) & ( \$ 000 ) \\ \hline \mathrm { Dr } & \text { Cash } & 2545 & \\ \hline \mathrm { Cr } & \text { Share capital } & & 1500 \\ \hline \mathrm { Cr } & \text { Retained earnings } & & 500 \\ \hline \mathrm { Cr } & \text { Goodwill } & & 545 \\ \hline \end{array}\] D) \[\begin{array} { | l | l | r | r | } \hline & & ( \$ 000 ) & ( \$ 000 ) \\ \hline \mathrm { Dr } & \text { Share capital } & 1500 & \\ \hline \mathrm { Dr } & \text { Retained earnings } & 500 & \\ \hline \mathrm { Cr } & \text { Cash } & & 2000 \\ \hline \end{array}\] A) \[\begin{array} { | c | l | r | r | } \hline & & ( \$ 000 ) & ( \$ 000 ) \\ \hline \mathrm { Dr } & \text { Share capital } & 1500 & \\ \hline \mathrm { Dr } & \text { Retained earnings } & 500 & \\ \hline \mathrm { Dr } & \text { Goodwill } & 545 & \\ \hline \mathrm { Cr } & \text { Investment in Cheese Ltd } & & 2545 \\ \hline \end{array}\] B) \[\begin{array} { | l | l | r | r | } \hline & & ( \$ 000 ) & ( \$ 000 ) \\ \hline \text { Dr } & \text { Investment in Cheese Ltd } & 2545 & \\ \hline \mathrm { Cr } & \text { Share capital } & & 1500 \\ \hline \mathrm { Cr } & \text { Goodwill } & & 1045 \\ \hline \end{array}\] C) \[\begin{array} { | r | l | r | r | } \hline & & ( \$ 000 ) & ( \$ 000 ) \\ \hline \mathrm { Dr } & \text { Cash } & 2545 & \\ \hline \mathrm { Cr } & \text { Share capital } & & 1500 \\ \hline \mathrm { Cr } & \text { Retained earnings } & & 500 \\ \hline \mathrm { Cr } & \text { Goodwill } & & 545 \\ \hline \end{array}\] D) \[\begin{array} { | l | l | r | r | } \hline & & ( \$ 000 ) & ( \$ 000 ) \\ \hline \mathrm { Dr } & \text { Share capital } & 1500 & \\ \hline \mathrm { Dr } & \text { Retained earnings } & 500 & \\ \hline \mathrm { Cr } & \text { Cash } & & 2000 \\ \hline \end{array}\] A

A) is excluded from consolidation because the investor is a venture capital organisation. B) is not excluded from consolidation simply because the investor is a venture capital organisation. C) is excluded from consolidation because its business activities are dissimilar from those of other entities within the group. D) is not excluded from consolidation simply because the investor only has significant influence, and not control, over it. A) is excluded from consolidation because the investor is a venture capital organisation. B) is not excluded from consolidation simply because the investor is a venture capital organisation. C) is excluded from consolidation because its business activities are dissimilar from those of other entities within the group. D) is not excluded from consolidation simply because the investor only has significant influence, and not control, over it.

Exam 27: Accounting for Group Structures

Gouda Ltd acquires all the issued capital of Cheese Ltd for a cash payment of $2 545 000 on 30 June 2015.The statement of financial position of Cheese Ltd at purchase date is: (\ 000) Assets Cash 85 Accounts receivable 185 Equipment 990 Land Total assets Liabilities Accounts payable 45 Loans Total liabilities Shareholders' equity Share capital 1500 Retained earnings Total liabilities and shareholders' funds Assuming the assets are at fair value,what would be the consolidation entry to eliminate the investment in Cheese Ltd?

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(Multiple Choice)

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Question 1

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On 1 July 2012,Mawson Ltd acquires all shares in Mountain Ltd for $400 000.The fair value of net assets acquired is $320 000 comprising $200 000 in share capital and $120 000 in retained earnings.On the date of purchase,successful publishing title is not recorded in the books of the acquiree but assumed by the acquirer.The publishing title is estimated at $20 000 and likely to eventuate after acquisition.What is the appropriate elimination entry for this investment that is in accordance with AASB 3 Business Combinations and AASB 10 Consolidated Financial Statements?

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(Multiple Choice)

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Question 2

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Discuss the reason for recognising non-controlling interests as part of equity,rather than as a liability.

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(Essay)

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Question 3

Correct Answer:

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The consolidated financial statements reflect the financial position and financial performance of the economic entity as if it were operating as a single economic unit under common managerial control-the control emanating from the management group of the ultimate parent organisation.In rejecting the parent-entity concept the accounting standard-setters considered that it was inappropriate to classify the interests of outside shareholders,that is the non-controlling interests,as liabilities because their claim on the net assets of a subsidiary is not of the nature of a liability.
For more information refer to 'Alternative consolidation concepts'.

Discuss,and provide an example of the 'partition' effect that existed under the previous Corporations Law,prior to 1991.

(Essay)

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Question 4

What are the three key elements of the definition of control? Enumerate several factors that may provide an indication of control.

(Essay)

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Question 5

Briefly outline the steps taken in order that the financial information about the group is presented as that of a single economic entity.

(Essay)

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Question 6

On consolidation,the investment in subsidiary,shown in the investor's books,shall be eliminated in full against which of the following?

(Multiple Choice)

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Question 7

The consolidation process does not involve any adjustments to the financial statements of the individual entities making up the group.

(True/False)

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Question 8

On 1 July 2012,Bob Ltd acquires all shares in Ted Ltd for $600 000.The fair value of net assets acquired is $500 000 comprising $400 000 in share capital and $100 000 in retained earnings.What is the appropriate elimination entry for this investment that is in accordance with AASB 3 Business Combinations and AASB 10 Consolidated Financial Statements?

(Multiple Choice)

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Question 9

In the situation in which a subsidiary revalues its non-current assets to fair value in its books as part of being acquired by a parent entity,the accounting treatment is:

(Multiple Choice)

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Question 10

Which consolidation concept mainly underlies the approach adopted in AASB 10?

(Multiple Choice)

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Question 11

When an investee is classified as an associate which method of accounting is used to account for the investment?

(Multiple Choice)

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Question 12

Gingimup Ltd purchased all the equity of Kindawansa Ltd on 30 June 2015.At that time the carrying value of the net assets of Kindawansa was $1 200 000.This amount was made up in equity as follows: share capital $1 000 000; retained earnings $200 000.Kindawansa has held some valuable land for a long time (purchased at $ 1 200 000),but has not revalued it.Its fair value at 30 June 2015 was $2 800 000 (all other non-current assets are recorded at fair value).Gingimup Ltd paid cash consideration of $3 000 000 for Kindawansa Ltd.Assuming that the land has not been revalued in the controlled entity's books,what are the elimination entries required to reflect the purchase of Kindawansa Ltd?

(Multiple Choice)

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Question 13

Directors have determined that goodwill acquired in 2014 has been impaired by $5000.What is the appropriate elimination entry for this impairment?

(Multiple Choice)

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Question 14

On 1 July 2012,Felix Ltd acquires all shares in Oscar Ltd for $800 000.The fair value of net assets acquired is $620 000 comprising $400 000 in share capital and $220 000 in retained earnings.What is the appropriate elimination entry for this investment that is in accordance with AASB 3 Business Combinations and AASB 10 Consolidated Financial Statements?

(Multiple Choice)

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Question 15

Briefly outline the three main concepts of consolidation and how they differ.Identify the concept used in Australia and the implications this has for the consolidation accounting process.

(Essay)

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Question 16

A former loophole (now closed)that existed under the former s.9 of The Corporations Law:

(Multiple Choice)

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Question 17

A consolidated entity is defined as:

(Multiple Choice)

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Question 18

Non-controlling interests are defined is AASB 10 as:

(Multiple Choice)

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Question 19

A subsidiary:

(Multiple Choice)

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Question 20

Showing 1 - 20 of 87

Exam 27: Accounting for Group Structures

Discuss the reason for recognising non-controlling interests as part of equity,rather than as a liability.

Discuss,and provide an example of the 'partition' effect that existed under the previous Corporations Law,prior to 1991.

What are the three key elements of the definition of control? Enumerate several factors that may provide an indication of control.

Briefly outline the steps taken in order that the financial information about the group is presented as that of a single economic entity.

On consolidation,the investment in subsidiary,shown in the investor's books,shall be eliminated in full against which of the following?

The consolidation process does not involve any adjustments to the financial statements of the individual entities making up the group.

In the situation in which a subsidiary revalues its non-current assets to fair value in its books as part of being acquired by a parent entity,the accounting treatment is:

Which consolidation concept mainly underlies the approach adopted in AASB 10?

When an investee is classified as an associate which method of accounting is used to account for the investment?

Directors have determined that goodwill acquired in 2014 has been impaired by $5000.What is the appropriate elimination entry for this impairment?

Briefly outline the three main concepts of consolidation and how they differ.Identify the concept used in Australia and the implications this has for the consolidation accounting process.

A former loophole (now closed)that existed under the former s.9 of The Corporations Law:

A consolidated entity is defined as:

Non-controlling interests are defined is AASB 10 as:

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

Further Consolidation Issues I: Accounting for Intragroup Transactions

Further Consolidation Issues II: Accounting for Non-Controlling Interests

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

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

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