Question 1

Revaluation of assets to fair value in a business combination will be accounted for:

Accepted Answer

A)  in the records of the subsidiary. 
B)  on consolidation. 
C)  either A or B. 
D)  none of the above. 
A)  in the records of the subsidiary. 
B)  on consolidation. 
C)  either A or B. 
D)  none of the above. C

Question 2

Describe the accounting effects of a reverse acquisition.

Accepted Answer

Accounting for a reverse acquisition affects only the consolidated financial statements of the group resulting from the business combination.Reverse acquisition accounting applies to the allocation of the cost of the business combination on the date of acquisition and to the adjustments
eliminating the investment asset against pre-acquisition equity acquired.In allocating the cost of the business combination,the fair values of the assets,liabilities and contingent liabilities of the legal parent and acquiree must be recognised.The assets and liabilities of the legal subsidiary and acquirer are measured at their carrying amounts immediately before the business combination and are not restated to fair value.The treatment of transactions occurring after the commencement of the business combination follows the usual consolidation procedures.

Question 3

Revaluation of an acquiree's assets in a business combination via a consolidation adjustment represents the use of the cost model.

Accepted Answer

A) True 
 B)False  True

Question 4

In allocating the cost of a business combination,what is not required to exist at the date of acquisition?

Accepted Answer

A)  Assets 
B)  Liabilities 
C)  Goodwill 
D)  Contingent liabilities 
A)  Assets 
B)  Liabilities 
C)  Goodwill 
D)  Contingent liabilities

Question 5

Explain the two circumstances under which a business combination may occur?

Accepted Answer

1)A Company acquires the business operat

Question 6

Current accounting standards require the use of the acquisition method in accounting for all business combinations.

Accepted Answer

A) True 
 B)False

Question 7

On consolidation,adjustment to deferred tax assets and liabilities is required for:

Accepted Answer

A)  unrealised intragroup profits. 
B)  unrealised intragroup losses. 
C)  fair value adjustments. 
D)  all of the above. 
A)  unrealised intragroup profits. 
B)  unrealised intragroup losses. 
C)  fair value adjustments. 
D)  all of the above.

Question 8

In accounting for a reverse acquisition,it is necessary to recognise the fair value of the net assets of:

Accepted Answer

A)  the acquiree. 
B)  the acquirer. 
C)  both the acquiree and acquirer. 
D)  none of the above. 
A)  the acquiree. 
B)  the acquirer. 
C)  both the acquiree and acquirer. 
D)  none of the above.

Question 9

Which accounts are affected when a dividend elimination entry occurs?

Accepted Answer

A)  Dividend revenue and dividend paid 
B)  Cash and dividend revenue 
C)  Dividend revenue and dividend declared 
D)  Dividend declared and cash 
A)  Dividend revenue and dividend paid 
B)  Cash and dividend revenue 
C)  Dividend revenue and dividend declared 
D)  Dividend declared and cash

Question 10

Management of acquiring companies have incentive to provide for as many future costs as possible in a business combination.

Accepted Answer

A) True 
 B)False

Question 11

An acquirer in a business combination can acquire:

Accepted Answer

A)  the assets and liabilities of a business. 
B)  the issued shares of an acquire company. 
C)  either A or B. 
D)  none of the above. 
A)  the assets and liabilities of a business. 
B)  the issued shares of an acquire company. 
C)  either A or B. 
D)  none of the above.

Question 12

Discuss the reasons why the fair value of a subsidiary's net assets may not be equal to their carrying amount.

Accepted Answer

Fair value-carrying amount:
- The carryi

Question 13

Intragroup dividends do not result in a requirement for tax effect adjustments on consolidation if:

Accepted Answer

A)  group companies are Australian. 
B)  the dividend is fully franked. 
C)  both A and B. 
D)  none of the above. 
A)  group companies are Australian. 
B)  the dividend is fully franked. 
C)  both A and B. 
D)  none of the above.

Question 14

The acquisition method applies to:

Accepted Answer

A)  the sale of a subsidiary. 
B)  the sale of individual assets. 
C)  the sale of a business. 
D)  all of the above. 
A)  the sale of a subsidiary. 
B)  the sale of individual assets. 
C)  the sale of a business. 
D)  all of the above.

Question 15

What is the accounting treatment for a group where the reporting entity is being sued?

Accepted Answer

A)  Upon consolidation, the unrecorded liability will be recognised at its fair value. 
B)  No reporting is necessary until the case is settled. 
C)  Only a footnote in the consolidated financial statements is required. 
D)  Recognition is appropriate only if a loss is probable. 
A)  Upon consolidation, the unrecorded liability will be recognised at its fair value. 
B)  No reporting is necessary until the case is settled. 
C)  Only a footnote in the consolidated financial statements is required. 
D)  Recognition is appropriate only if a loss is probable.

Question 16

The dividend imputation system covers all members of a group,whether or not they are Australian residents.

Accepted Answer

A) True 
 B)False

Question 17

Discuss the reasons for ignoring tax effects in respect of goodwill recognised on consolidation in a business combination.

Accepted Answer

Tax effects of goodwill:
- Goodwill amor

Question 18

Intragroup dividends do not require any tax effect adjustments on consolidation.

Accepted Answer

A) True 
 B)False

Question 19

A company records a gain on bargain purchase of $40 000 on the acquisition of a subsidiary.Assuming there are no other tax adjustments for any companies,if the trading profit of the group before tax were $140 000,and given a tax rate of 30%,the group income tax expense would be:

Accepted Answer

A)  $42 000. 
B)  $54 000. 
C)  $30 000. 
D)  none of the above. 
A)  $42 000. 
B)  $54 000. 
C)  $30 000. 
D)  none of the above.

Question 20

Adjustments required in a reverse acquisition only affect the consolidated financial statements.

Accepted Answer

A) True 
 B)False

Revaluation of assets to fair value in a business combination will be accounted for:

Describe the accounting effects of a reverse acquisition.

Revaluation of an acquiree's assets in a business combination via a consolidation adjustment represents the use of the cost model.

In allocating the cost of a business combination,what is not required to exist at the date of acquisition?

Explain the two circumstances under which a business combination may occur?

Current accounting standards require the use of the acquisition method in accounting for all business combinations.

On consolidation,adjustment to deferred tax assets and liabilities is required for:

In accounting for a reverse acquisition,it is necessary to recognise the fair value of the net assets of:

Which accounts are affected when a dividend elimination entry occurs?

Management of acquiring companies have incentive to provide for as many future costs as possible in a business combination.

An acquirer in a business combination can acquire:

Discuss the reasons why the fair value of a subsidiary's net assets may not be equal to their carrying amount.

Intragroup dividends do not result in a requirement for tax effect adjustments on consolidation if:

The acquisition method applies to:

What is the accounting treatment for a group where the reporting entity is being sued?

The dividend imputation system covers all members of a group,whether or not they are Australian residents.

Discuss the reasons for ignoring tax effects in respect of goodwill recognised on consolidation in a business combination.

Intragroup dividends do not require any tax effect adjustments on consolidation.

A company records a gain on bargain purchase of $40 000 on the acquisition of a subsidiary.Assuming there are no other tax adjustments for any companies,if the trading profit of the group before tax were $140 000,and given a tax rate of 30%,the group income tax expense would be:

Adjustments required in a reverse acquisition only affect the consolidated financial statements.

Text Objectives and Introduction to Consolidation

Principles of Consolidation

Intra-Group Transactions

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 3: Fair Value Adjustments and Tax Effects

Revaluation of assets to fair value in a business combination will be accounted for:

Describe the accounting effects of a reverse acquisition.

Revaluation of an acquiree's assets in a business combination via a consolidation adjustment represents the use of the cost model.

In allocating the cost of a business combination,what is not required to exist at the date of acquisition?

Explain the two circumstances under which a business combination may occur?

Current accounting standards require the use of the acquisition method in accounting for all business combinations.

On consolidation,adjustment to deferred tax assets and liabilities is required for:

In accounting for a reverse acquisition,it is necessary to recognise the fair value of the net assets of:

Which accounts are affected when a dividend elimination entry occurs?

Management of acquiring companies have incentive to provide for as many future costs as possible in a business combination.

An acquirer in a business combination can acquire:

Discuss the reasons why the fair value of a subsidiary's net assets may not be equal to their carrying amount.

Intragroup dividends do not result in a requirement for tax effect adjustments on consolidation if:

The acquisition method applies to:

What is the accounting treatment for a group where the reporting entity is being sued?

The dividend imputation system covers all members of a group,whether or not they are Australian residents.

Discuss the reasons for ignoring tax effects in respect of goodwill recognised on consolidation in a business combination.

Intragroup dividends do not require any tax effect adjustments on consolidation.

A company records a gain on bargain purchase of $40 000 on the acquisition of a subsidiary.Assuming there are no other tax adjustments for any companies,if the trading profit of the group before tax were $140 000,and given a tax rate of 30%,the group income tax expense would be:

Adjustments required in a reverse acquisition only affect the consolidated financial statements.

Text Objectives and Introduction to Consolidation

Principles of Consolidation

Intra-Group Transactions

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