Exam 32: Further Consolidation Issues Iv: Accounting for Changes in the Deg

Dolly Ltd acquired a 60 per cent interest in Vardon Ltd on 1 July 2002 for a cash consideration of $1,300,000.At that date fair value of the net assets of Vardon Ltd were represented by: On 1 July 2004 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: Impairment of goodwill was assessed at $3,000; of which $2,000 related to the year ended 30 June 2005.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 2006?

AASB 3 specifies that where a parent entity purchases additional shares in a subsidiary over time:

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. 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:

Fan Ltd acquired a 60 per cent interest in Dance Ltd on 1 July 2002 for a cash consideration of $780,000.At that date the fair value of the net assets of Dance Ltd was represented by: On 30 June 2005 Fan Ltd sold all its shares in Dance Ltd for $880,000.At this date the fair value of the net assets of Dance Ltd was represented by: The retained earnings of $350,000 include operating profit after tax of $20,000 from the current period.Impairment of goodwill was assessed at $5,400,the impairment having been incurred evenly across the last three 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?

Fish Ltd acquired an 80 per cent interest in Chips Ltd on 1 July 2003 for a cash consideration of $838,000.At that date the fair value of the net assets of Chips Ltd was represented by: On 30 June 2005 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: The retained earnings of $490,000 includes operating profit after tax of $90,000 from the current period.Impairment of goodwill was assessed at $6,000,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?

On 1 July 2004,Horse Ltd acquired 80 per cent of the issued capital of Wagon Ltd for $785,000 when the fair value of the net assets of Wagon Ltd was $950,000 (share capital $800,000 and retained earnings $150,000).On 30 June 2007 Horse Ltd purchased the final 20 per cent of Wagon's issued capital for $380,000.The net assets of Wagon Ltd were not stated at fair value in the accounts,which are summarised as follows: The fair value of the plant and equipment is $1,250,000 and the land was valued at $970,000 at year end.Impairment of goodwill was assessed at $7,500,the impairment having been incurred evenly across the last three years.There were no intragroup transactions during the period. What are the consolidation journal entries required for the period ended 30 June 2007? (Ignore the tax effect of the revaluation)

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:

Which of the following is not a reason for a parent to lose control of a subsidiary?

AASB 127 "Consolidated and Separate 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.

When additional shares in a subsidiary are acquired,AASB 3 requires each acquisition to be accounted for separately:

Spock Ltd acquired a 10 per cent holding in Kirk Ltd on 1 July 2011 for $350,000 cash,being the fair value of consideration transferred. On 30 June 2012,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 2012 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 127?

In calculating the profit or loss on the sale of shares in a controlled entity that is to be included in the group accounts,consideration should be given to the share of post-acquisition profits and movements in reserves that have been recognised.

Which of the following statements is in accordance with AASB 127 "Consolidated Financial Statements" with respect to multiple acquisitions?

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.

Fish Ltd acquired an 80 per cent interest in Chips Ltd on 1 July 2003 for a cash consideration of $838,000.At that date the fair value of the net assets of Chips Ltd was represented by: On 30 June 2005 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: The retained earnings of $490,000 includes operating profit after tax of $90,000 from the current period.Impairment of goodwill was assessed at $6,000.The investment has not been marked to market during the period that the shares were held.What is the amount of profit or loss on the sale of the shares recognised in the books of Fish Ltd during the period ended 30 June 2005?

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. At the time of the sale of the shares,the parent was holding the investment in subsidiary at what amount,in its own books?

The profit or loss on the sale of shares in a controlled entity will be the same in the parent entity's legal books as it is in the consolidated accounts:

Under the step-by-step method,the need to revalue the subsidiary's assets,liabilities and contingent liabilities to fair value at each acquisition date,is not an indication that the acquirer has elected to apply the revaluation method for measuring assets,such as that prescribed by AASB 116:

Two common approaches to accounting for acquisition of additional shares in a subsidiary include:

Window Ltd acquired a 70 per cent interest in Door Ltd on 1 July 2003 for a cash consideration of $1,399,000.At that date fair value of the net assets of Door Ltd were represented by: On 1 July 2004 Window Ltd purchased a further 30 per cent of the issued capital of Door Ltd for cash consideration of $665,000.At this date the fair value of the net assets of Door Ltd were represented by: Impairment of goodwill was assessed at $4,000; relating evenly across each of the last two years.During the period ended 30 June 2005,Door Ltd proposed a dividend of $120,000.The dividend has not been paid at the end of the period,but Window Ltd has a policy of accruing the dividends of subsidiaries when they are proposed.There were no other intragroup transactions.What are the consolidation entries to eliminate the investment in the subsidiary,account for goodwill and eliminate the dividends for the period ended 30 June 2005?