Exam 5: Consolidation: Non-Controlling Interest

What does the "group" consist of under the entity concept of consolidation?

Whereas the goodwill of the subsidiary may be determined by calculating the goodwill acquired by the parent entity and then adding the fair value of the NCI, this process is not applicable for a gain on bargain purchase.

Robson Ltd. acquired 80% of Cool Co. in 2012. During 2012, Cool sold inventory to Robson. At the end of 2013, the goods were still in Robson's inventory. Robson correctly eliminated the $20,000 of unrealized profits on its 2013 consolidated financial statements and the goods were finally sold in 2014. In preparing its 2014 consolidated financial statements, what adjustments should be made with respect to the previously unrealized profit?

Arbiter Ltd. holds a 60% interest in Brown Ltd. On July 1, 2012, Brown Ltd. transferred a depreciable non-current asset to Arbiter Ltd. at a profit of $5,000. The remaining useful life of the asset at the date of transfer was 4 years and the tax rate is 30%. The impact of the above on the NCI share of net income for the year ended June 30, 2013 is:

Compare the full goodwill method and the partial goodwill methods of calculating the NCI at the acquisition date.

Why is the calculation of the NCI necessary for both for the Statement of Changes in Equity and for the Statement of Financial Position?

Arnold Ltd holds a 60% interest in Burford Ltd. Burford Ltd sells inventory to Arnold Ltd during the year for $10,000. The inventory originally cost $7,000. At the end of the year, 50% of the inventory is still on hand. The tax rate is 30%. The NCI share of net income adjustment required, in relation to this transaction, is a decrease of:

Wilson Ltd. owns 60% of the outstanding common shares of Miller Ltd. During 2013, sales from Miller to Wilson were $200,000. Merchandise was priced to provide Miller with a gross margin of 20%. Wilson' inventories contained $40,000 at December 31, 2012 and $15,000 at December 31, 2013 of merchandise purchased from Miller. Cost of goods sold for Wilson and Miller for 2013 on their separate-entity income statements were as follows: Wilson Miller Beginning inventory \ 100,000 \ 50,000 Purchases 700,000 200,000 Ending inventory (110,000) (55,000) Cost of goods sold \ 690,000 \ 195,000 What is cost of goods sold on the consolidated income statement for 2013?

Discuss the implications of a gain on bargain purchase for the non-controlling interest.

Gerrard Ltd. acquired 75% of Sittler Ltd. at April 30, 2012. Both companies have April 30 year-ends. Which of the following adjustements should be made to the opening non-controlling interest (NCI)balance to arrive at the April 30, 2013 NCI balance on Gerrard's statement of financial position?

Levi Ltd. owns 60% of the outstanding common shares of Modry Ltd. During 2013, sales from Modry to Levi were $200,000. Merchandise was priced to provide Modry with a gross margin of 20%. Levi's inventories contained $40,000 at December 31, 2012 and $15,000 at December 31, 2013 of merchandise purchased from Modry. Cost of goods sold for Levi and Modry for 2013 on their separate-entity income statements were as follows: Levi Modry Beginning inventory \ 100,000 \ 50,000 Purchases 700,000 200,000 Ending inventory (110,000) (55,000) Cost of goods sold \ 690,000 \ 195,000 What is the balance of the inventory account on Levi's consolidated statement of financial position at December 31, 2013?

T Limited owns 90% of the share capital of S Limited. S Limited paid a dividend of $20,000 during the period. The adjustment in the consolidated financial statements for the dividend includes: a) $\text { Decrease\quad Dividend revenue } \quad\$ 18,000 \text {. }$ b) $\text { Decrease\quad Dividend revenue } \quad\$ 20,000 \text {. }$ c) $\text { Decrease } \quad \text { Dividend payable }\quad \$ 18,000 \text {. }$ d) $\text { Increase } \quad \text { Dividend receivable }\quad \$ 20,000$

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

Viner Ltd. acquired 70% of Bittner Ltd. on January 1, 2010. On January 1, 2014, Viner acquired another 10% of Bittner's common shares for $250,000. With respect to this additional purchase, which of the following is TRUE?

The IASB and the AASB have chosen to adopt the ________ concept of consolidation, mainly because of the conceptual framework decision that financial statements are prepared for a wide range of users.

There are three main concepts of consolidation - proprietary, entity and parent entity. The choice of concept affects how consolidated financial statements are prepared:

Harry Co. acquired 75% of Samir Ltd. 3 years ago. In calculating the balance for the non-controlling interest share of net income, Harry started with the net income from Samir's current year-end single-entity financial statements. Which of the following adjustments must be added to Samir's net income in calculating NCI's share of net income?

When preparing and presenting a consolidated statement of comprehensive income, the non-controlling interest is presented as a separate component of revenue.

Dobson Co. purchased 80% of Niki Ltd. for $1,200,000. At the date of acquisition, the carrying value of Niki's net identifiable assets was $1,000,000, and the fair value was $1,300,000 net of tax. What is the amount of the goodwill under the partial goodwill method?

Which of the following statements regarding the non-controlling interest is FALSE?