Question 1

With the transfer of services within the group:
I made a change to the original question, as the original question is very similar to Q16.

Accepted Answer

A)  there will be an increase in deferred tax assets. 
B)  the consolidation adjustments do not affect profit of the group. 
C)  the group's profit equals service revenue less service expense. 
D)  there will be an increase in income tax expense. 
A)  there will be an increase in deferred tax assets. 
B)  the consolidation adjustments do not affect profit of the group. 
C)  the group's profit equals service revenue less service expense. 
D)  there will be an increase in income tax expense.

Question 2

A Ltd sold an item of plant to B Ltd on 1 January 20X7 for $25 000. The asset had cost A Ltd $30 000 when acquired on 1 January 20X5. At that time the useful life of the plant was assessed at 6 years. The adjustment necessary on consolidation to reflect the tax effect of the depreciation adjustment for the year ended 30 June 20X7 will result in an increase in:

Accepted Answer

A)  deferred tax assets. 
B)  deferred tax liabilities. 
C)  income tax expense. 
D)  current tax liability. 
A)  deferred tax assets. 
B)  deferred tax liabilities. 
C)  income tax expense. 
D)  current tax liability.

Question 3

A parent entity group sold a depreciable non-current asset to a subsidiary entity for $2800. The asset originally cost $3000 and at the date of sale accumulated depreciation was $500. The amount of the unrealised gain on sale to be eliminated is:

Accepted Answer

A)  $2800 
B)  $500 
C)  $300 
D)  $200 
A)  $2800 
B)  $500 
C)  $300 
D)  $200

Question 4

When eliminating an intragroup service which of the followings would appear in the consolidation worksheet entry?

Accepted Answer

A)  Dr Services expense 
B)  Dr Services revenue 
C)  Cr Income tax expense 
D)  Cr Deferred tax liability 
A)  Dr Services expense 
B)  Dr Services revenue 
C)  Cr Income tax expense 
D)  Cr Deferred tax liability

Question 5

During the year ended 30 June 20X7, a parent entity rents a warehouse from a subsidiary entity for $100 000. The company tax rate is 30%. The consolidation adjustment entry needed at reporting date is:

Accepted Answer

A)  $\begin{array} { l l l l } 
\text { Rent revenue } & \mathrm { Dr } & 100,000 & \
\text { Rent expense } & \mathrm { Cr } & & 100,000
\end{array}$ 
B) $\begin{array} { l l l l } 
\text { Rent revenue } & \mathrm { Dr } & 100,000 & \
\text { Rent expense } & \mathrm { Cr } & & 100,000 \
\text { Income tax expense } & \mathrm { Dr } & 30,000 & \
\text { Deferred tax liability } & \mathrm { Cr } & & 30,000
\end{array}$ 
C)  $\begin{array} { l l l l } 
\text { Rent revenue } & \mathrm { Dr } & 100,000 & \
\text { Rent expense } & \mathrm { Cr } &  100,000 \
\text { Deferred tax asset } & \mathrm { Dr } & 30,000 & \
\text { Income tax expense } & \mathrm { Cr } &  30,000
\end{array}$ 
D)  $\begin{array} { l l l l } 
\text { Rent expense } & \mathrm { Dr } & 100,000 & \
\text { Rent revenue } & \mathrm { Cr } & & 100,000
\end{array}$ 
A)  $\begin{array} { l l l l } 
\text { Rent revenue } & \mathrm { Dr } & 100,000 & \
\text { Rent expense } & \mathrm { Cr } & & 100,000
\end{array}$ 
B) $\begin{array} { l l l l } 
\text { Rent revenue } & \mathrm { Dr } & 100,000 & \
\text { Rent expense } & \mathrm { Cr } & & 100,000 \
\text { Income tax expense } & \mathrm { Dr } & 30,000 & \
\text { Deferred tax liability } & \mathrm { Cr } & & 30,000
\end{array}$ 
C)  $\begin{array} { l l l l } 
\text { Rent revenue } & \mathrm { Dr } & 100,000 & \
\text { Rent expense } & \mathrm { Cr } &  100,000 \
\text { Deferred tax asset } & \mathrm { Dr } & 30,000 & \
\text { Income tax expense } & \mathrm { Cr } &  30,000
\end{array}$ 
D)  $\begin{array} { l l l l } 
\text { Rent expense } & \mathrm { Dr } & 100,000 & \
\text { Rent revenue } & \mathrm { Cr } & & 100,000
\end{array}$

Question 6

A parent entity made an advance of $50 000 to its subsidiary. The parent charges interest of $3000 on this advance. The consolidation adjustment to eliminate the advance is:

Accepted Answer

A)  DR Interest revenue $\quad\$ 53000$
 CR Interest expense $\quad\$ 53000$ 
B)  DR Interest expense $\quad$ $\$ 53,000$ 
 $\quad$CR Interest revenue  $\quad$$\$ 53,000$ 
C)  DR Advance to subsidiary  $\quad$$\$ 50,000$ 
 $\quad$CR Advance from parent $\quad$ $\$ 50,000$ 
D) DR Advance from parent $\quad$ $\$ 50,000$ 
 $\quad$CR Advance to subsidiary  $\quad$$\$ 50,000$ 
A)  DR Interest revenue $\quad\$ 53000$
 CR Interest expense $\quad\$ 53000$ 
B)  DR Interest expense $\quad$ $\$ 53,000$ 
 $\quad$CR Interest revenue  $\quad$$\$ 53,000$ 
C)  DR Advance to subsidiary  $\quad$$\$ 50,000$ 
 $\quad$CR Advance from parent $\quad$ $\$ 50,000$ 
D) DR Advance from parent $\quad$ $\$ 50,000$ 
 $\quad$CR Advance to subsidiary  $\quad$$\$ 50,000$

Question 7

Andronico Limited provided an advance of $500 000 to its subsidiary Galactico Limited. On consolidation, the following adjustment is needed in relation to this intragroup advance:

Accepted Answer

A)  no adjustment needed 
B)  $\text { DR } \quad \text { Advances to subsidiaries } \quad \$ 500,000$
$\text { CR Advances from parent } \quad \$ 500,000$ 
C)  $\text { DR } \quad \text { Advances from parent } \quad \$ 500,000$
$\text { CR } \quad \text { Advances to subsidiaries } \quad \$ 500,000$ 
D) $\begin{array} { l l l l } 
\text { DR } & \text { Advances from parent } & \$ 500,000 & \
\text { CR } & \text { Cash } & & \$ 500,000
\end{array}$ 
A)  no adjustment needed 
B)  $\text { DR } \quad \text { Advances to subsidiaries } \quad \$ 500,000$
$\text { CR Advances from parent } \quad \$ 500,000$ 
C)  $\text { DR } \quad \text { Advances from parent } \quad \$ 500,000$
$\text { CR } \quad \text { Advances to subsidiaries } \quad \$ 500,000$ 
D) $\begin{array} { l l l l } 
\text { DR } & \text { Advances from parent } & \$ 500,000 & \
\text { CR } & \text { Cash } & & \$ 500,000
\end{array}$

Question 8

A subsidiary sold inventory to its parent entity in Year 1 at a profit of $5000. At balance sheet date the parent had not sold the inventory. The company tax rate is 30%. The Year 1 consolidation worksheet will contain the following adjustment entry for inventory:

Accepted Answer

A)  DR Inventory $5 000 
B)  DR Inventory $ 3 500 
C)  CR Inventory $5 000 
D)  CR Inventory $3 500 
A)  DR Inventory $5 000 
B)  DR Inventory $ 3 500 
C)  CR Inventory $5 000 
D)  CR Inventory $3 500

Question 9

A subsidiary entity sold inventory to its parent entity at a profit of $4000. The goods had originally cost the subsidiary $10 000. At the end of the year all the inventory was still on hand. The adjustment entry to deal with this transaction on consolidation would include the following line item:

Accepted Answer

A)  CR Inventory $4 000 
B)  CR Inventory $6 000 
C)  CR Inventory $10 000 
D)  CR Inventory $14 000 
A)  CR Inventory $4 000 
B)  CR Inventory $6 000 
C)  CR Inventory $10 000 
D)  CR Inventory $14 000

Question 10

In May 20X7, a parent entity sold inventory to a subsidiary entity for $30 000. The inventory had previously cost the parent entity $24 000. The entire inventory is still held by the subsidiary at reporting date, 30 June 20X7. Ignoring tax effects, the adjustment entry in the consolidation worksheet at reporting date is:

Accepted Answer

A) $\begin{array} { l l l l } 
\text { Cash } & \mathrm { Dr } & 24,000 & \
\quad \text { Sales revenue } & \mathrm { Cr } & & 24,000 \
\text { Cost of sales } & \mathrm { Dr } & 24,000 & \
\quad \text { Inventory } & \mathrm { Cr } & & 24,000
\end{array}$ 
B) $\begin{array} { l l l l } 
\text { Sales revenue } & \mathrm { Dr } & 24,000 & \
\quad \text { Cash } & \mathrm { Cr } & & 24,000 \
\text { Inventory } & \mathrm { Dr } & 24,000 & \
\quad \text { Cost of sales } & \mathrm { Cr } & & 24,000
\end{array}$ 
C) 
$\begin{array}{llr}\text { Sales revenue }& \mathrm{Dr}&30,000\
\text { Cost of sales } & \mathrm{Cr} & 6,000 \
\text { Inventory } & \mathrm{Cr} & 24,000
\end{array}$ 
D)  $\begin{array}{llr}\text { Sales revenue } & \mathrm{Dr} & 30,000\
\text { Cost of sales } & \mathrm{Cr} & 24,000 \
\text { Inventory } & \mathrm{Cr} & 6,000
\end{array}$ 
A) $\begin{array} { l l l l } 
\text { Cash } & \mathrm { Dr } & 24,000 & \
\quad \text { Sales revenue } & \mathrm { Cr } & & 24,000 \
\text { Cost of sales } & \mathrm { Dr } & 24,000 & \
\quad \text { Inventory } & \mathrm { Cr } & & 24,000
\end{array}$ 
B) $\begin{array} { l l l l } 
\text { Sales revenue } & \mathrm { Dr } & 24,000 & \
\quad \text { Cash } & \mathrm { Cr } & & 24,000 \
\text { Inventory } & \mathrm { Dr } & 24,000 & \
\quad \text { Cost of sales } & \mathrm { Cr } & & 24,000
\end{array}$ 
C) 
$\begin{array}{llr}\text { Sales revenue }& \mathrm{Dr}&30,000\
\text { Cost of sales } & \mathrm{Cr} & 6,000 \
\text { Inventory } & \mathrm{Cr} & 24,000
\end{array}$ 
D)  $\begin{array}{llr}\text { Sales revenue } & \mathrm{Dr} & 30,000\
\text { Cost of sales } & \mathrm{Cr} & 24,000 \
\text { Inventory } & \mathrm{Cr} & 6,000
\end{array}$

With the transfer of services within the group: I made a change to the original question, as the original question is very similar to Q16.

A parent entity group sold a depreciable non-current asset to a subsidiary entity for $2800. The asset originally cost $3000 and at the date of sale accumulated depreciation was $500. The amount of the unrealised gain on sale to be eliminated is:

When eliminating an intragroup service which of the followings would appear in the consolidation worksheet entry?

During the year ended 30 June 20X7, a parent entity rents a warehouse from a subsidiary entity for $100 000. The company tax rate is 30%. The consolidation adjustment entry needed at reporting date is:

A parent entity made an advance of $50 000 to its subsidiary. The parent charges interest of $3000 on this advance. The consolidation adjustment to eliminate the advance is:

Andronico Limited provided an advance of $500 000 to its subsidiary Galactico Limited. On consolidation, the following adjustment is needed in relation to this intragroup advance:

A subsidiary sold inventory to its parent entity in Year 1 at a profit of $5000. At balance sheet date the parent had not sold the inventory. The company tax rate is 30%. The Year 1 consolidation worksheet will contain the following adjustment entry for inventory:

A subsidiary entity sold inventory to its parent entity at a profit of $4000. The goods had originally cost the subsidiary $10 000. At the end of the year all the inventory was still on hand. The adjustment entry to deal with this transaction on consolidation would include the following line item:

Accounting Regulation and the Conceptual Framework

Application of Accounting Theory

Shareholders Equity: Share Capital and Reserves

Fair Value Measurement

Revenue

Provisions, Contingent Liabilities and Contingent Assets

Income Taxes

Financial Instruments

Share-Based Payments

Translation of the Financial Statements of Foreign Entities

Employee Benefits

Inventories

Property, Plant and Equipment

Leases

Understanding Australian Accounting Standards

Impairment of Assets

Accounting for Mineral Resources

Agriculture

Financial Statement Presentation

Statement of Cash Flows

Earnings Per Share

Operating Segments

Operating Segments

Business Combinations

Consolidation: Principles and Accounting Requirements

Consolidation: Non Controlling Interest

Joint Arrangements

Associates and Joint Ventures

Filters

Exam 26: Consolidation: Intragroup Transactions

With the transfer of services within the group: I made a change to the original question, as the original question is very similar to Q16.

A parent entity group sold a depreciable non-current asset to a subsidiary entity for $2800. The asset originally cost $3000 and at the date of sale accumulated depreciation was $500. The amount of the unrealised gain on sale to be eliminated is:

When eliminating an intragroup service which of the followings would appear in the consolidation worksheet entry?

During the year ended 30 June 20X7, a parent entity rents a warehouse from a subsidiary entity for $100 000. The company tax rate is 30%. The consolidation adjustment entry needed at reporting date is:

A parent entity made an advance of $50 000 to its subsidiary. The parent charges interest of $3000 on this advance. The consolidation adjustment to eliminate the advance is:

Andronico Limited provided an advance of $500 000 to its subsidiary Galactico Limited. On consolidation, the following adjustment is needed in relation to this intragroup advance:

A subsidiary sold inventory to its parent entity in Year 1 at a profit of $5000. At balance sheet date the parent had not sold the inventory. The company tax rate is 30%. The Year 1 consolidation worksheet will contain the following adjustment entry for inventory:

A subsidiary entity sold inventory to its parent entity at a profit of $4000. The goods had originally cost the subsidiary $10 000. At the end of the year all the inventory was still on hand. The adjustment entry to deal with this transaction on consolidation would include the following line item:

Accounting Regulation and the Conceptual Framework

Application of Accounting Theory

Shareholders Equity: Share Capital and Reserves

Fair Value Measurement

Revenue

Provisions, Contingent Liabilities and Contingent Assets

Income Taxes

Financial Instruments

Share-Based Payments

Translation of the Financial Statements of Foreign Entities

Employee Benefits

Inventories

Property, Plant and Equipment

Leases

Understanding Australian Accounting Standards

Impairment of Assets

Accounting for Mineral Resources

Agriculture

Financial Statement Presentation

Statement of Cash Flows

Earnings Per Share

Operating Segments

Operating Segments

Business Combinations

Consolidation: Principles and Accounting Requirements

Consolidation: Non Controlling Interest

Joint Arrangements

Associates and Joint Ventures

Filters