Question 1

The proprietary concept is sometimes referred to as proportional consolidation or pro rata consolidation.

Accepted Answer

A) True 
 B)False  True

Question 2

The NCI consists of the accumulation of all the interests in the subsidiary other than that belonging to the parent.

Accepted Answer

A) True 
 B)False  True

Question 3

Norman Ltd. owns 60% of the outstanding common shares of Arnie Ltd. During 2013, sales from Arnie to Norman were $200,000. Merchandise was priced to provide Arnie with a gross margin of 20%. Norman's inventories contained $40,000 at December 31, 2012 and $15,000 at December 31, 2013 of merchandise purchased from Arnie. Cost of goods sold for Norman and Arnie for 2013 on their separate-entity income statements were as follows: $\begin{array}{|l|r|r|} 
\hline& \text { Norman } & \text { Arnie } \
\hline \text { Beginning inventory } & \$ 100,000 & \$ 50,000 \
\hline \text { Purchases } & 700,000 & 200,000 \
\hline \text { Ending inventory } & (110,000) & (55,000) \
\hline \text { Cost of goods sold } & \$ 690,000 & \$ 195,000 \
\hline
\end{array}$ How much is the non-controlling interest adjusted for its share of the consolidated net income for the year ended December 31, 2013?

Accepted Answer

A) $3,000. 
B) $5,000. 
C) $1,250. 
D) $2,000. 
A) $3,000. 
B) $5,000. 
C) $1,250. 
D) $2,000. A

Question 4

Under the partial goodwill method, the NCI is measured as a proportion of the net fair value of the identifiable net assets of the subsidiary at the acquisition date.

Accepted Answer

A) True 
 B)False

Question 5

Which consolidation method does NOT include incorporating 100% of a subsidiary's revenues and expenses?

Accepted Answer

A) Parent-company method. 
B) Parent-company extension method. 
C) Proportional consolidation. 
D) Entity method. 
A) Parent-company method. 
B) Parent-company extension method. 
C) Proportional consolidation. 
D) Entity method.

Question 6

Which of the following statements regarding the full goodwill method is FALSE?

Accepted Answer

A) The NCI is measured at fair value at acquisition date. 
B) Goodwill is recognized at 100%. 
C) The fair value of the NCI is determined on the basis of the market prices for shares not acquired by the parent, or, if these are not available, a valuation technique is used. 
D) Only the parent's share of goodwill is recognized on consolidation. 
A) The NCI is measured at fair value at acquisition date. 
B) Goodwill is recognized at 100%. 
C) The fair value of the NCI is determined on the basis of the market prices for shares not acquired by the parent, or, if these are not available, a valuation technique is used. 
D) Only the parent's share of goodwill is recognized on consolidation.

Question 7

Any gain on bargain purchase adjusts for the ___________ share of ___________ equity only.

Accepted Answer

A) parent's; pre-acquisition 
B) subsidiary's; pre-acquisition 
C) parent's; post-acquisition 
D) subsidiary's; post-acquisition. 
A) parent's; pre-acquisition 
B) subsidiary's; pre-acquisition 
C) parent's; post-acquisition 
D) subsidiary's; post-acquisition.

Question 8

In the rare case where a gain on bargain purchase may arise, such a gain has no effect on the calculation of the NCI share of equity.

Accepted Answer

A) True 
 B)False

Question 9

Discuss the implications of a parent's increase and decrease in ownership interest.

Accepted Answer

When a parent increases its ownership in

Question 10

Which of the following statements regarding the proprietary concept of consolidation is FALSE?

Accepted Answer

A) The proprietary concept is sometimes referred to as proportional consolidation or pro rata consolidation. 
B) The group consists of the assets and liabilities of the parent and the parent's proportional share of the assets and liabilities of the subsidiary. 
C) The consolidated financial statements include all the net assets of a subsidiary. 
D) As the NCI is outside the group, the NCI share of subsidiary equity is not disclosed. 
A) The proprietary concept is sometimes referred to as proportional consolidation or pro rata consolidation. 
B) The group consists of the assets and liabilities of the parent and the parent's proportional share of the assets and liabilities of the subsidiary. 
C) The consolidated financial statements include all the net assets of a subsidiary. 
D) As the NCI is outside the group, the NCI share of subsidiary equity is not disclosed.

Question 11

Fillington Inc. acquired a 75% shareholding in Donhenry Ltd. for $20 million. Book value of net identifiable assets of Donhenry is $14 million. The fair value of Donhenry's asset is the same as their book value except accounts receivables, which are impaired by $1 million. Book value of assets is $54 million while book value of liabilities is $40 million. The NCI has been valued at $5 million. The tax rate is 30%.
Required:
Calculate goodwill using the full goodwill method.

Accepted Answer

Acquisition Analysis:
 \[\begin{array} {

Question 12

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

Accepted Answer

A) Is allocated 100% of the gain. 
B) Has no involvement with 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) Is allocated 100% of the gain. 
B) Has no involvement with 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 13

There are three main concepts of consolidation - proprietary, entity and parent entity.

Accepted Answer

A) True 
 B)False

Question 14

How is the consolidated ending retained earnings balance calculated?

Accepted Answer

A) Add together the ending retained earnings of all the affiliated companies. 
B) Add the beginning consolidated retained earnings to consolidated net income and subtract the parent company's dividends declared. 
C) Adjust the parent company's opening retained earnings for the subsidiary's profits and dividends. 
D) Adjust the parent company's ending retained earnings for the subsidiary's profits and dividends. 
A) Add together the ending retained earnings of all the affiliated companies. 
B) Add the beginning consolidated retained earnings to consolidated net income and subtract the parent company's dividends declared. 
C) Adjust the parent company's opening retained earnings for the subsidiary's profits and dividends. 
D) Adjust the parent company's ending retained earnings for the subsidiary's profits and dividends.

Question 15

When preparing and presenting a consolidated statement of comprehensive income, the non-controlling interest is:

Accepted Answer

A) Presented as a separate component of revenue. 
B) Shown as a separate component of profit before tax and a separate component of tax expense. 
C) Shown as a separate component of each line item. 
D) Presented as an allocation of profit or loss attributable to the non-controlling interest. 
A) Presented as a separate component of revenue. 
B) Shown as a separate component of profit before tax and a separate component of tax expense. 
C) Shown as a separate component of each line item. 
D) Presented as an allocation of profit or loss attributable to the non-controlling interest.

Question 16

On January 1, 2012, Kiss Ltd. acquired a 60% interest in Rosebud Inc. For $115,000. At this date, the equity of Rosebud consisted of the following:
 $$\begin{array} { l l } 
\text { Share capital } & \$ 100,000 \
\text { Retained earnings } & \$ 50,000
\end{array}$$ At this date, the identifiable assets and liabilities of Rosebud were recorded at fair value except for the following assets:
 $$\begin{array} { l l l } 
\text { Equipment (cost } \$ 100,000 ) & \text { Carrying Amount: } \$ 70,000 & \text { Fair Value: } \$ 80,000 \
\text { Land } & \text { Carrying Amount: } \$ 85,000 & \text { Fair Value: } \$ 95,000 \
\text { Inventory } & \text { Carrying Amount: } \$ 55,000 & \text { Fair Value: } \$ 60,000
\end{array}$$ The equipment had a further 5-year useful life and half of the inventory on hand at the acquisition date was sold by December 31, 2012. The other half was sold in 2013. The land has not been sold.
Kiss uses the full goodwill method. The fair value of the non-controlling interest at January 1, 2012 was $75,000.
During the three years since acquisition, Rosebud has recorded the following annual results:
Year-ended December 31, 2012: Profit of $20,000
Year-ended December 31, 2013: Profit of $25,000
There has been no dividend paid or declared by Rosebud since the acquisition date. The tax rate is 30%.
Required:
a()Prepare the consolidated financial statements adjustment as at January 1, 2012
b()Prepare the consolidated financial statements adjustments for the year ended December 31, 2012
c()Prepare the consolidated financial statements adjustments for the year ended December 31, 2013

Accepted Answer

@#IMG-DLM&_TB3634_00 A)Acquisition adjustments as

Question 17

What is the recommended method for disclosing a non-controlling interest in a company on a consolidated balance sheet where significant sales have occurred between the two companies?

Accepted Answer

A) Goodwill adjustment. 
B) On the balance sheet as a specially designated long-term liability. 
C) In shareholder's equity. 
D) None of the above. 
A) Goodwill adjustment. 
B) On the balance sheet as a specially designated long-term liability. 
C) In shareholder's equity. 
D) None of the above.

Question 18

Describe the key characteristics of the entity concept of consolidation.

Accepted Answer

Under the entity concept of consolidatio

Question 19

Under the partial goodwill method, the NCI does not get a share of any equity relating to goodwill.

Accepted Answer

A) True 
 B)False

Question 20

A non-controlling interest is entitled to a share of which of the following items? I Equity of the group entity at acquisition date.
II Current period profit or loss of the subsidiary entity.
III Changes in equity of the subsidiary since acquisition date and the beginning of the financial period.
IV Equity of the subsidiary at acquisition date.

Accepted Answer

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

The proprietary concept is sometimes referred to as proportional consolidation or pro rata consolidation.

The NCI consists of the accumulation of all the interests in the subsidiary other than that belonging to the parent.

Under the partial goodwill method, the NCI is measured as a proportion of the net fair value of the identifiable net assets of the subsidiary at the acquisition date.

Which consolidation method does NOT include incorporating 100% of a subsidiary's revenues and expenses?

Which of the following statements regarding the full goodwill method is FALSE?

Any gain on bargain purchase adjusts for the _ share of _ equity only.

In the rare case where a gain on bargain purchase may arise, such a gain has no effect on the calculation of the NCI share of equity.

Discuss the implications of a parent's increase and decrease in ownership interest.

Which of the following statements regarding the proprietary concept of consolidation is FALSE?

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

There are three main concepts of consolidation - proprietary, entity and parent entity.

How is the consolidated ending retained earnings balance calculated?

When preparing and presenting a consolidated statement of comprehensive income, the non-controlling interest is:

What is the recommended method for disclosing a non-controlling interest in a company on a consolidated balance sheet where significant sales have occurred between the two companies?

Describe the key characteristics of the entity concept of consolidation.

Under the partial goodwill method, the NCI does not get a share of any equity relating to goodwill.

Accounting for Investments

Business Combinations

Consolidation: Wholly Owned Subsidiaries

Consolidations: Intragroup Transactions

Accounting for Investments in Associates and Joint Ventures

Accounting for Foreign Currency

Accounting for Foreign Investments

Reporting for Not-For-Profit Organizations

Reporting for Public Sector Entities

Filters

Exam 5: Consolidation: Non-Controlling Interest

The proprietary concept is sometimes referred to as proportional consolidation or pro rata consolidation.

The NCI consists of the accumulation of all the interests in the subsidiary other than that belonging to the parent.

Under the partial goodwill method, the NCI is measured as a proportion of the net fair value of the identifiable net assets of the subsidiary at the acquisition date.

Which consolidation method does NOT include incorporating 100% of a subsidiary's revenues and expenses?

Which of the following statements regarding the full goodwill method is FALSE?

Any gain on bargain purchase adjusts for the ___________ share of ___________ equity only.

In the rare case where a gain on bargain purchase may arise, such a gain has no effect on the calculation of the NCI share of equity.

Discuss the implications of a parent's increase and decrease in ownership interest.

Which of the following statements regarding the proprietary concept of consolidation is FALSE?

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

There are three main concepts of consolidation - proprietary, entity and parent entity.

How is the consolidated ending retained earnings balance calculated?

When preparing and presenting a consolidated statement of comprehensive income, the non-controlling interest is:

What is the recommended method for disclosing a non-controlling interest in a company on a consolidated balance sheet where significant sales have occurred between the two companies?

Describe the key characteristics of the entity concept of consolidation.

Under the partial goodwill method, the NCI does not get a share of any equity relating to goodwill.

Accounting for Investments

Business Combinations

Consolidation: Wholly Owned Subsidiaries

Consolidations: Intragroup Transactions

Accounting for Investments in Associates and Joint Ventures

Accounting for Foreign Currency

Accounting for Foreign Investments

Reporting for Not-For-Profit Organizations

Reporting for Public Sector Entities

Filters

Any gain on bargain purchase adjusts for the _ share of _ equity only.