Question 1

The useful life of a depreciable asset can not change subsequent to an intra-group sale of the asset

Accepted Answer

A) True 
 B)False

Question 2

Where a parent entity sells inventories to a subsidiary this is called an 'upstream' sale

Accepted Answer

A) True 
 B)False

Question 3

P Ltd acquired inventories for $150,000 which were sold to its subsidiary S Ltd for $120,000 (assume a tax rate of 30%)On consolidation a deferred tax liability would be recorded for:

Accepted Answer

A)  $45,000 
B)  $36,000 
C)  $9,000 
D)  Not recorded 
A)  $45,000 
B)  $36,000 
C)  $9,000 
D)  Not recorded

Question 4

Where service fees are accrued by group members there is no tax effect on consolidation

Accepted Answer

A) True 
 B)False

Question 5

Using the same data as for question 9 what would be the consolidation entry required for the next financial year (assuming S sold all the inventory during the next year)

Accepted Answer

A)   
B)   
C)   
D) none of the above 
A)   
B)   
C)   
D) none of the above

Question 6

Deferred tax assets and liabilities arising from accrual of intra-group interest on loans should be offset as a consolidation adjustment

Accepted Answer

A) True 
 B)False

Question 7

Unrealised gains on the intra-group sale of depreciable assets are realised via depreciation charges over the remaining useful life of the asset

Accepted Answer

A) True 
 B)False

Question 8

An impairment loss will be recognised in the group accounts when non current assets are sold at a loss on an intra-group basis when:

Accepted Answer

A)  value in use is greater than carrying amount 
B)  value in use is less than carrying amount 
C)  value in use is greater than sale price 
D)  value in use is less than sale price 
A)  value in use is greater than carrying amount 
B)  value in use is less than carrying amount 
C)  value in use is greater than sale price 
D)  value in use is less than sale price

Question 9

Consolidation entries never adjust cash because intra-group transactions do not alter the group's cash position

Accepted Answer

A) True 
 B)False

Question 10

Using the same facts as Question 14 but assuming that S will depreciate the asset over its remaining estimated useful life of 8 years.What is the depreciation expense adjustment required on consolidation I year after the intra group sale?

Accepted Answer

A)  CR $400 
B)  DR $400 
C)  CR $2,100 
D)  CR $2,500 
A)  CR $400 
B)  DR $400 
C)  CR $2,100 
D)  CR $2,500

Question 11

S Ltd acquired land from its parent company P Ltd for $1,000,000 The land had originally cost P Ltd $100,000 (assume a tax rate of 30%)On consolidation the deferred tax asset will be recorded at:

Accepted Answer

A)  $300,000 
B)  $30,000 
C)  $270,000 
D)  not recorded 
A)  $300,000 
B)  $30,000 
C)  $270,000 
D)  not recorded

Question 12

P Ltd lends $200,000 to its subsidiary S Ltd.At the end of the year S Ltd has paid interest of $18,000 and owes a further $2,000 (assume a tax rate of 30%)The required consolidation entry is:

Accepted Answer

A)   
B)   
C)   
D)   
A)   
B)   
C)   
D)

Question 13

Which of the following accounts cannot be altered by a consolidation adjusting entry:

Accepted Answer

A)  income tax expense 
B)  income tax payable 
C)  deferred tax asset. 
D)  deferred tax asset 
A)  income tax expense 
B)  income tax payable 
C)  deferred tax asset. 
D)  deferred tax asset

Question 14

Current accounting regulations require the separate disclosures in profit or loss of gains and losses on disposal of non current assets

Accepted Answer

A) True 
 B)False

Question 15

A Ltd sells inventory to its parent P Ltd for $60,000 representing a mark up of 50% on cost.At year end 3/4 of the goods are still held by P Ltd.The unrealised profit to be eliminated on consolidation is:

Accepted Answer

A)  $20,000 
B)  $15,000 
C)  $30,000 
D)  $10,000 
A)  $20,000 
B)  $15,000 
C)  $30,000 
D)  $10,000

Question 16

Dividends paid by the parent company and all subsidiaries will be eliminated as consolidation adjustments

Accepted Answer

A) True 
 B)False

The useful life of a depreciable asset can not change subsequent to an intra-group sale of the asset

Where a parent entity sells inventories to a subsidiary this is called an 'upstream' sale

P Ltd acquired inventories for $150,000 which were sold to its subsidiary S Ltd for $120,000 (assume a tax rate of 30%)On consolidation a deferred tax liability would be recorded for:

Where service fees are accrued by group members there is no tax effect on consolidation

Using the same data as for question 9 what would be the consolidation entry required for the next financial year (assuming S sold all the inventory during the next year)

Deferred tax assets and liabilities arising from accrual of intra-group interest on loans should be offset as a consolidation adjustment

Unrealised gains on the intra-group sale of depreciable assets are realised via depreciation charges over the remaining useful life of the asset

An impairment loss will be recognised in the group accounts when non current assets are sold at a loss on an intra-group basis when:

Consolidation entries never adjust cash because intra-group transactions do not alter the group's cash position

Using the same facts as Question 14 but assuming that S will depreciate the asset over its remaining estimated useful life of 8 years.What is the depreciation expense adjustment required on consolidation I year after the intra group sale?

S Ltd acquired land from its parent company P Ltd for $1,000,000 The land had originally cost P Ltd $100,000 (assume a tax rate of 30%)On consolidation the deferred tax asset will be recorded at:

P Ltd lends $200,000 to its subsidiary S Ltd.At the end of the year S Ltd has paid interest of $18,000 and owes a further $2,000 (assume a tax rate of 30%)The required consolidation entry is:

Which of the following accounts cannot be altered by a consolidation adjusting entry:

Current accounting regulations require the separate disclosures in profit or loss of gains and losses on disposal of non current assets

A Ltd sells inventory to its parent P Ltd for $60,000 representing a mark up of 50% on cost.At year end 3/4 of the goods are still held by P Ltd.The unrealised profit to be eliminated on consolidation is:

Dividends paid by the parent company and all subsidiaries will be eliminated as consolidation adjustments

Text Objectives and Introduction to Consolidation

Principles of Consolidation

Fair Value Adjustments and Tax Effects

Non-Controlling Interest

Partly-Owned Subsidiaries: Indirect Non-Controlling Interest

Consolidated Cash Flow Statements

Accounting for Joint Arrangements

Accounting for Associates and Joint Ventures: the Equity Method

Translation and Consolidation of Foreign Currency Financial Statements

Segment Reporting by Diversified Entities

Filters

Exam 4: Intra-Group Transactions

The useful life of a depreciable asset can not change subsequent to an intra-group sale of the asset

Where a parent entity sells inventories to a subsidiary this is called an 'upstream' sale

P Ltd acquired inventories for $150,000 which were sold to its subsidiary S Ltd for $120,000 (assume a tax rate of 30%)On consolidation a deferred tax liability would be recorded for:

Where service fees are accrued by group members there is no tax effect on consolidation

Using the same data as for question 9 what would be the consolidation entry required for the next financial year (assuming S sold all the inventory during the next year)

Deferred tax assets and liabilities arising from accrual of intra-group interest on loans should be offset as a consolidation adjustment

Unrealised gains on the intra-group sale of depreciable assets are realised via depreciation charges over the remaining useful life of the asset

An impairment loss will be recognised in the group accounts when non current assets are sold at a loss on an intra-group basis when:

Consolidation entries never adjust cash because intra-group transactions do not alter the group's cash position

Using the same facts as Question 14 but assuming that S will depreciate the asset over its remaining estimated useful life of 8 years.What is the depreciation expense adjustment required on consolidation I year after the intra group sale?

S Ltd acquired land from its parent company P Ltd for $1,000,000 The land had originally cost P Ltd $100,000 (assume a tax rate of 30%)On consolidation the deferred tax asset will be recorded at:

P Ltd lends $200,000 to its subsidiary S Ltd.At the end of the year S Ltd has paid interest of $18,000 and owes a further $2,000 (assume a tax rate of 30%)The required consolidation entry is:

Which of the following accounts cannot be altered by a consolidation adjusting entry:

Current accounting regulations require the separate disclosures in profit or loss of gains and losses on disposal of non current assets

A Ltd sells inventory to its parent P Ltd for $60,000 representing a mark up of 50% on cost.At year end 3/4 of the goods are still held by P Ltd.The unrealised profit to be eliminated on consolidation is:

Dividends paid by the parent company and all subsidiaries will be eliminated as consolidation adjustments

Text Objectives and Introduction to Consolidation

Principles of Consolidation

Fair Value Adjustments and Tax Effects

Non-Controlling Interest

Partly-Owned Subsidiaries: Indirect Non-Controlling Interest

Consolidated Cash Flow Statements

Accounting for Joint Arrangements

Accounting for Associates and Joint Ventures: the Equity Method

Translation and Consolidation of Foreign Currency Financial Statements

Segment Reporting by Diversified Entities

Filters