On 1 January 20X0, Zed Ltd acquired 100 % 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: $\begin{array}{llcc} \text { } &\$ \\ \text {Share capital } &700000\\ \text {Retained profits } &50000\\ \text { Asset revaluation reserve } &100000\ \end{array}$ Assuming all assets and liabilities were recorded at their fair values what was the difference on acquisition?

A) $50 000 goodwill B) $50 000 bargain purchase C) $100 000 goodwill D) $100 000 bargain purchase A) $50 000 goodwill B) $50 000 bargain purchase C) $100 000 goodwill D) $100 000 bargain purchase

On 1 January 20X0, Linda Ltd acquired 100 % of the share capital of Yoko Ltd for $900 000 cash.At that date, the equity section of Yoko Ltd's balance sheet was as follows: $\begin{array}{llcc} \text { } &\$ \\ \text {Share capital } &900000\\ \text {Retained profits } &400000\\ \text { Asset revaluation reserve } &300000\ \end{array}$ Assuming all assets and liabilities were recorded at their fair values what will be the effect of the acquisition on the financial statements?

A) Goodwill will be increased by $700 000 in Linda's separate statements B) Bargain purchase will be increased by $700 000 in the Linda Group consolidated statements C) Bargain purchase will be increased by $700 000 in the Linda separate statements D) Goodwill will be increased by $400 000 in Yoko's separate statements A) Goodwill will be increased by $700 000 in Linda's separate statements B) Bargain purchase will be increased by $700 000 in the Linda Group consolidated statements C) Bargain purchase will be increased by $700 000 in the Linda separate statements D) Goodwill will be increased by $400 000 in Yoko's separate statements

Exam 15: Investments in New Assets; Introduction to Business Combinations and Associates

On 1 January 20X0, Zed Ltd acquired 100 % 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: \ Share capital 700000 Retained profits 50000 Asset revaluation reserve 100000\ Assuming all assets and liabilities were recorded at their fair values what was the difference on acquisition?

(Multiple Choice)

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Question 21

Company F has an equity accounted investment (owns 20% of the shares) in Company K, purchased in 20X1, with a carrying amount of $200 000 at year end 20X4.Company K reports no increase in owner's equity for the year ended 20X5 but pays a cash dividend of $60 000, of which Company F receives $12 000.Which journal entry will Company F process in respect of this investment as reported in its consolidated financial statements?

(Multiple Choice)

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Question 22

In a business combination, the only goodwill components suitable for recognition in financial statements are component 4, synergies, and component 5, over-valuation of the consideration.

(True/False)

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Question 23

The recoding of acquired goodwill in a business combination can only be made in the consolidated statements of the group.

(True/False)

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Question 24

Beethoven Ltd acquired 20% and significant influence over the operations of Chopin Ltd and control over the operations of Mend Ltd on 1 July 20X0.Chopin Ltd reported a profit of $800 000 for the year ended 30 June 20X1.For its financial year ended 30 June 20X1, Beethoven Ltd would report a share of Chopin Ltd's profit of:

(Multiple Choice)

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Question 25

The equity method of accounting is always used to account for share investments which convey significant influence.

(True/False)

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Question 26

According to AASB 128, the main evidence of significant influence, through an investor's power to participate in policy setting, include:

(Multiple Choice)

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Question 27

ZXW Ltd buys a tractor from WQR Ltd by undertaking to pay a debt currently owed by WQR Ltd.This debt is recognised in WQR Ltd's accounts at $250 000 and it has a fair value of $230 000.ZXW Ltd incurs $10 000 legal fees in arranging this acquisition.ZXW Ltd would initially record this tractor at:

(Multiple Choice)

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Question 28

Internally created synergies of a subsidiary can be recognised as an asset during a business combination.

(True/False)

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Question 29

On 1 January 20X0, Linda Ltd acquired 100 % of the share capital of Yoko Ltd for $900 000 cash.At that date, the equity section of Yoko Ltd's balance sheet was as follows: \ Share capital 900000 Retained profits 400000 Asset revaluation reserve 300000\ Assuming all assets and liabilities were recorded at their fair values what will be the effect of the acquisition on the financial statements?

(Multiple Choice)

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Question 30

Company F has an equity accounted investment (owns 20% of the shares) in Company K, purchased in 20X1, with a carrying amount of $200 000 at year end 20X4.Company K reports a total increase in owner's equity for the year ended 20X5 of $80 000.Which journal entry will Company F process in respect of this investment?

(Multiple Choice)

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Question 31

Evil Ltd acquired 20% of and significant influence over the operations of Electric Ltd on 1 July 20X0.At that date the equity of Electric Ltd comprised retained profits of $800 000 and paid up capital of $3 000 000.During the financial year ended 30 June 20X1, Electric Ltd declared and paid a dividend of $200 000 out of profits earned to 30 June 20X0 and declared a final dividend of $300 000 out of profits earned in the year ended 30 June 20X1.Evil Ltd does not control any entities.What is the journal entry to record these dividends for Evil Ltd for the year ended 30 June 20X1 using the equity method?

(Multiple Choice)

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Question 32

Interchange of management personnel is not a factor pointing toward the existence of a significant influence relationship.

(True/False)

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Question 33

Baker Ltd acquired 22% of and significant influence over the operations of Street Ltd on 1 July 20X0.During the financial year ended 30 June 20X1, Street Ltd earned a profit of $140 000.Baker Ltd does not control any entities.What is the journal entry to record the share of Street Ltd's result in the accounts of Baker Ltd for the year ended 30 June 20X1 using the equity method?

(Multiple Choice)

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Question 34

Return of post-acquisition equity has always been regarded as a dividend revenue and not as return of the initial investment.

(True/False)

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Question 35

Showing 21 - 35 of 35

In a business combination, the only goodwill components suitable for recognition in financial statements are component 4, synergies, and component 5, over-valuation of the consideration.

The recoding of acquired goodwill in a business combination can only be made in the consolidated statements of the group.

The equity method of accounting is always used to account for share investments which convey significant influence.

According to AASB 128, the main evidence of significant influence, through an investor's power to participate in policy setting, include:

ZXW Ltd buys a tractor from WQR Ltd by undertaking to pay a debt currently owed by WQR Ltd.This debt is recognised in WQR Ltd's accounts at $250 000 and it has a fair value of $230 000.ZXW Ltd incurs $10 000 legal fees in arranging this acquisition.ZXW Ltd would initially record this tractor at:

Internally created synergies of a subsidiary can be recognised as an asset during a business combination.

Interchange of management personnel is not a factor pointing toward the existence of a significant influence relationship.

Return of post-acquisition equity has always been regarded as a dividend revenue and not as return of the initial investment.

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

The Corporate Group

Acquisition Method Introduction and Substitution

Acquisition Method Application After Control Date

Intra-Group Transactions

Direct Non-Controlling Interest

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

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