Question 1

Before 2008 the full goodwill method was not allowed under IFRS.

Accepted Answer

A) True 
 B)False

Question 2

Dividends attributable to direct NCI are always included in the consolidation (that is, are not eliminated).

Accepted Answer

A) True 
 B)False

Question 3

Black Ltd acquired 75 % of White Ltd on 1 January 20X1 by paying $5 000 000 cash.At that date, the equity section of White Ltd's balance sheet was as follows:
$\begin{array}{llcc}
&\$\
  \text {Share capital  } &1000000  \
 \text {  Retained profits} &3000000\
 \text { Asset revaluation reserve } &500000\

\end{array}$

All assets and liabilities were recorded at their fair values.During May 20X1 White Ltd paid a total dividend of $1 000 000 out of profits earned before 1 January 20X1.AASB 127.38A was not operational.
What would be the balance of the account 'Investment in White Ltd' at 30 June 20X1?

Accepted Answer

A) $5 000 000 
B) $4 000 000 
C) $4 250 000 
D) $2 125 000 
A) $5 000 000 
B) $4 000 000 
C) $4 250 000 
D) $2 125 000

Question 4

Company A owns 60% and controls Company B, which pays a dividend of $1 million of which Company A receives $600 000.Because intra-group transactions are eliminated in full, the whole $1 million dividend is eliminated from consolidated amounts of dividend revenue.

Accepted Answer

A) True 
 B)False

Question 5

On 1 January 20X0, Zed Ltd acquired 90 % of the share capital of Ned Ltd for $900 000 cash.At that date, the equity section of Ned Ltd's balance sheet was as follows:
$\begin{array}{llcc}
&\$\
  \text {Share capital  } &700000  \
 \text {  Retained profits} &50000\
 \text { Asset revaluation reserve } &100000\

\end{array}$

Assume all assets and liabilities were recorded at their fair values, except for a piece of equipment recorded at $50 000 but Zed Ltd considers it to have a fair value of $100 000. This equipment is not revalued by Ned Ltd. What was the difference on acquisition under the partial method?

Accepted Answer

A) Nil 
B) $90 000 bargain purchase 
C) $90 000 goodwill 
D) $50 000 goodwill 
A) Nil 
B) $90 000 bargain purchase 
C) $90 000 goodwill 
D) $50 000 goodwill

Question 6

Lillee Ltd acquired 60% of the issued share capital of Thompson Ltd on 1 February 20X1.Thompson Ltd's shareholders equity (all at fair value) at that date was as follows:
$\begin{array}{llcc}
&000s   \
 \text { Paid up capital } &\$4000\
 \text { Retained profits } &\$1000\
 \text { Asset revaluation reserve } &\$2000\

\end{array}$

Lillee Ltd paid $8 000 000 for this acquisition.For the year ended June 30 20X1 $500 000 of goodwill impairment was recognised under the partial method.For the 20X2 and 20X3 years no impairment was recognised.On June 30 20X3 the financial position was the same except that Thompson retained profits were $2 000 000.If consolidated financial statements were prepared on June 30 20X3, what balance sheet amount would be shown as NCI's share of retained profits?

Accepted Answer

A) $800 000 
B) $400 000 
C) $600 000 
D) $300 000 
A) $800 000 
B) $400 000 
C) $600 000 
D) $300 000

Question 7

Lillee Ltd acquired 60% of the issued share capital of Thompson Ltd on 1 February 20X1.Thompson Ltd's shareholders equity (all at fair value) at that date was as follows:
$\begin{array}{llcc}
&000s   \
 \text { Paid up capital } &\$4000\
 \text { Retained profits } &\$1000\
 \text { Asset revaluation reserve } &\$2000\

\end{array}$

If Lillee Ltd paid $8 000 000 for this acquisition what is the elimination entry if consolidated financial statements were prepared on 2 February 20X1? Under the full method the fair value of NCI is assessed as being $3 200 000.

Accepted Answer

A) $\begin{array} { l r r } 
\text { Accounts } & \text { Debit } \$ \mathbf { 0 0 0 } & \text { Credit } \$ \mathbf { 0 0 0 } \
\text { Paid up capital } & 2400 & \
\text { Retained profits } & 600 & \
\text { Asset revaluation reserve } & 1200 & \
\text { Goodwill } & 4200 & \
\text { Investment in Thompson Ltd } & & 8000 \
\text { NCI reserve } & & 400
\end{array}$ 
B) $\begin{array} { l r r } 
\text { Accounts } & \text { Debit } \$ \mathbf { 0 0 0 } & \text { Credit } \$ \mathbf { 0 0 0 } \
\text { Paid up capital } & 4000 & \
\text { Retained profits } & 1000 & \
\text { Asset revaluation reserve } & 2000 & \
\text { Goodwill } & 4200 & \
\text { Investment in Thompson Ltd } & & 8000 \
\text { NCI reserve } & & 3200
\end{array}$ 
C) $\begin{array} { l r r } 
\text { Accounts } & \text { Debit } \$ \mathbf { 0 0 0 } & \text { Credit } \$ \mathbf { 0 0 0 } \
\text { Paid up capital } & 4000 & \
\text { Retained profits } & 1000 & \
\text { Asset revaluation reserve } & 2000 & \
\text { Investment in Thompson Ltd } & & 7000
\end{array}$ 
D) $\begin{array} { l r r } 
\text { Accounts } & \text { Debit } \$ \mathbf { 0 0 0 } & \text { Credit } \$ 000 \
\text { Paid up capital } & 2400 & \
\text { Retained profits } & 600 & \
\text { Asset revaluation reserve } & 1200 & \
\text { NCI reserve } & 3200 & \
\text { Investment in Thompson Ltd } & & 10200
\end{array}$ 
A) $\begin{array} { l r r } 
\text { Accounts } & \text { Debit } \$ \mathbf { 0 0 0 } & \text { Credit } \$ \mathbf { 0 0 0 } \
\text { Paid up capital } & 2400 & \
\text { Retained profits } & 600 & \
\text { Asset revaluation reserve } & 1200 & \
\text { Goodwill } & 4200 & \
\text { Investment in Thompson Ltd } & & 8000 \
\text { NCI reserve } & & 400
\end{array}$ 
B) $\begin{array} { l r r } 
\text { Accounts } & \text { Debit } \$ \mathbf { 0 0 0 } & \text { Credit } \$ \mathbf { 0 0 0 } \
\text { Paid up capital } & 4000 & \
\text { Retained profits } & 1000 & \
\text { Asset revaluation reserve } & 2000 & \
\text { Goodwill } & 4200 & \
\text { Investment in Thompson Ltd } & & 8000 \
\text { NCI reserve } & & 3200
\end{array}$ 
C) $\begin{array} { l r r } 
\text { Accounts } & \text { Debit } \$ \mathbf { 0 0 0 } & \text { Credit } \$ \mathbf { 0 0 0 } \
\text { Paid up capital } & 4000 & \
\text { Retained profits } & 1000 & \
\text { Asset revaluation reserve } & 2000 & \
\text { Investment in Thompson Ltd } & & 7000
\end{array}$ 
D) $\begin{array} { l r r } 
\text { Accounts } & \text { Debit } \$ \mathbf { 0 0 0 } & \text { Credit } \$ 000 \
\text { Paid up capital } & 2400 & \
\text { Retained profits } & 600 & \
\text { Asset revaluation reserve } & 1200 & \
\text { NCI reserve } & 3200 & \
\text { Investment in Thompson Ltd } & & 10200
\end{array}$

Question 8

Under the strict entity concept there should not be any apportionment of NCI in financial statement amounts.

Accepted Answer

A) True 
 B)False

Question 9

Kerry Ltd owns 70% of James Ltd.For the year ended 30 April 20X1, James Ltd reported a profit of $1 million.On 30 May 20X0, Kerry Ltd sold inventory to James Ltd for a $0.5 million profit.All of this inventory was sold by Kerry Ltd on 1 June 20X1.What is the NCI share of James Ltd's 20X1 profit?

Accepted Answer

A) $120 000 
B) $150 000 
C) $300 000 
D) $450 000 
A) $120 000 
B) $150 000 
C) $300 000 
D) $450 000

Question 10

Given the same transaction being compared, consolidation goodwill will always be higher under the full method than the partial method.

Accepted Answer

A) True 
 B)False

Before 2008 the full goodwill method was not allowed under IFRS.

Dividends attributable to direct NCI are always included in the consolidation (that is, are not eliminated).

Company A owns 60% and controls Company B, which pays a dividend of $1 million of which Company A receives $600 000.Because intra-group transactions are eliminated in full, the whole $1 million dividend is eliminated from consolidated amounts of dividend revenue.

Under the strict entity concept there should not be any apportionment of NCI in financial statement amounts.

Kerry Ltd owns 70% of James Ltd.For the year ended 30 April 20X1, James Ltd reported a profit of $1 million.On 30 May 20X0, Kerry Ltd sold inventory to James Ltd for a $0.5 million profit.All of this inventory was sold by Kerry Ltd on 1 June 20X1.What is the NCI share of James Ltd's 20X1 profit?

Given the same transaction being compared, consolidation goodwill will always be higher under the full method than the partial method.

Companies and Corporate Regulation

Objectives of Company Reporting, Conceptual Elements and Terminology

Forming a Company and Issuing Shares

Profits, Reserve and Distributions to Owners

Reorganisation of Share Capital

Debt Securities

Foreign Currency Transactions and an Introduction to Hedging

Advanced Asset and Liability Issues

Income Tax

Reports and Disclosures I: Overview

Reports and Disclosures Ii: the Financial Statements

Receivership and Voluntary Administration

Liquidations

External Administration Reports and Accounts

Investments in New Assets; Introduction to Business Combinations and Associates

The Corporate Group

Acquisition Method Introduction and Substitution

Acquisition Method Application After Control Date

Intra-Group Transactions

Changes to Parent Investment in Subsidiaries

Indirect Interest

Translation of Foreign Currency Statements

Consolidated Cash Flow Statements

Equity Accounting Expanded and Joint Ventures

Segment Reporting

Filters

Exam 20: Direct Non-Controlling Interest

Before 2008 the full goodwill method was not allowed under IFRS.

Dividends attributable to direct NCI are always included in the consolidation (that is, are not eliminated).

Company A owns 60% and controls Company B, which pays a dividend of $1 million of which Company A receives $600 000.Because intra-group transactions are eliminated in full, the whole $1 million dividend is eliminated from consolidated amounts of dividend revenue.

Under the strict entity concept there should not be any apportionment of NCI in financial statement amounts.

Kerry Ltd owns 70% of James Ltd.For the year ended 30 April 20X1, James Ltd reported a profit of $1 million.On 30 May 20X0, Kerry Ltd sold inventory to James Ltd for a $0.5 million profit.All of this inventory was sold by Kerry Ltd on 1 June 20X1.What is the NCI share of James Ltd's 20X1 profit?

Given the same transaction being compared, consolidation goodwill will always be higher under the full method than the partial method.

Companies and Corporate Regulation

Objectives of Company Reporting, Conceptual Elements and Terminology

Forming a Company and Issuing Shares

Profits, Reserve and Distributions to Owners

Reorganisation of Share Capital

Debt Securities

Foreign Currency Transactions and an Introduction to Hedging

Advanced Asset and Liability Issues

Income Tax

Reports and Disclosures I: Overview

Reports and Disclosures Ii: the Financial Statements

Receivership and Voluntary Administration

Liquidations

External Administration Reports and Accounts

Investments in New Assets; Introduction to Business Combinations and Associates

The Corporate Group

Acquisition Method Introduction and Substitution

Acquisition Method Application After Control Date

Intra-Group Transactions

Changes to Parent Investment in Subsidiaries

Indirect Interest

Translation of Foreign Currency Statements

Consolidated Cash Flow Statements

Equity Accounting Expanded and Joint Ventures

Segment Reporting

Filters