Use the following information to answer questions On 1 July 2008, P Limited acquired all the issued shares of S Limited for $50 000 when the equity of S Limited consisted of: $\begin{array} { l l } \text { Share Capital } & \$ 35,000 \\ \text { Retained Earnings } & \$ 15,000 \end{array}$ During the year ended 30 June 2009, S Limited paid an interim dividend of $5 000 from profits earned before 1 July 2008. -The pre-acquisition elimination entry at 1 July 2008 is:

A) $\begin{array} { l l l l } \text { Shares in S Limited } & \mathrm { Dr } & 50000 & \\ \text { Opening Retained earnings } & \mathrm { Cr } & & 15000 \\ \text { Share capital } & \mathrm { Cr } & & 35000 \end{array}$ B) $\begin{array} { l l l l } \text { Opening Retained earnings } & \mathrm { Dr } & 15000 & \\ \text { Share capital } & \mathrm { Dr } & 35000 & \\ \text { Shares in S Limited } & \mathrm { Cr } & & 50000 \end{array}$ C) $\begin{array} { l l l l } \text { Opening Retained earnings } & \mathrm { Dr } & 10000 & \\ \text { Share capital } & \mathrm { Dr } & 35000 & \\ \text { Shares in S Limited } & \mathrm { Cr } & & 45000 \end{array}$ D) $\begin{array} { l l l l } \text { Opening Retained earnings } & \mathrm { Dr } & 15,000 & \\ \text { Share capital } & \mathrm { Dr } & 35,000 & \\ \text { Dividend paid } & \mathrm { Cr } & 5,000 \\ \text { Shares in S Limited } & \mathrm { Cr } & 45,000 \end{array}$ A) $\begin{array} { l l l l } \text { Shares in S Limited } & \mathrm { Dr } & 50000 & \\ \text { Opening Retained earnings } & \mathrm { Cr } & & 15000 \\ \text { Share capital } & \mathrm { Cr } & & 35000 \end{array}$ B) $\begin{array} { l l l l } \text { Opening Retained earnings } & \mathrm { Dr } & 15000 & \\ \text { Share capital } & \mathrm { Dr } & 35000 & \\ \text { Shares in S Limited } & \mathrm { Cr } & & 50000 \end{array}$ C) $\begin{array} { l l l l } \text { Opening Retained earnings } & \mathrm { Dr } & 10000 & \\ \text { Share capital } & \mathrm { Dr } & 35000 & \\ \text { Shares in S Limited } & \mathrm { Cr } & & 45000 \end{array}$ D) $\begin{array} { l l l l } \text { Opening Retained earnings } & \mathrm { Dr } & 15,000 & \\ \text { Share capital } & \mathrm { Dr } & 35,000 & \\ \text { Dividend paid } & \mathrm { Cr } & 5,000 \\ \text { Shares in S Limited } & \mathrm { Cr } & 45,000 \end{array}$ B

One year after acquisition date, the goodwill acquired was regarded as having become impaired by $20 000. The appropriate consolidation adjustment in relation to the impairment will include the following line: $\begin{array} { l l l l } \text { a. } & \text { DR } & \text { Goodwill } & \$ 20000 \\ \text { b. } & \text { DR } & \text { Share capital } & \$ 20000 \\ \text { c. } & \text { CR } & \text { Business combination valuation reserve } & \$ 20000 \\ \text { d. } & \text { CR } & \text { Accumulated impairment losses } & \$ 20000 . \end{array}$

The answer of One year after acquisition date, the goodwill...

AASB 10 Consolidated Financial Statements defines a 'parent entity' and a 'subsidiary entity' as: The original answer was (a), which I think is incorrect. The correct answer should be (c). \[\begin{array} { | l | l | l | } \hline & \text { parent } & \text { Subsidiary } \\ \hline \text { I } & \begin{array} { l } \text { An entity which owns more than } 40 \% \text { of } \\ \text { the voting shares of another entity } \end{array} & \begin{array} { l } \text { An entity in which another entity owns } \\ \text { more than 40\% of the voting shares } \end{array} \\ \hline \text { II } & \begin{array} { l } \text { An entity which owns more than } 20 \% \text { of } \\ \text { the voting shares of another entity } \end{array} & \begin{array} { l } \text { An entity which is owned partly by another } \\ \text { entity } \end{array} \\ \hline \text { III } & \text { An entity that has one or more subsidiaries } & \begin{array} { l } \text { An entity which is controlled by a parent } \\ \text { entity } \end{array} \\ \hline \text { IV } & \text { An entity that controls another entity } & \begin{array} { l } \text { An entity in which the parent entity owns } \\ \text { more than } 20 \% \text { of the voting shares } \end{array} \\ \hline \end{array}\]

A) I B) II C) III D) IV A) I B) II C) III D) IV

Use the following information to answer questions On 1 July 2008, P Limited acquired all the issued shares of S Limited for $50 000 when the equity of S Limited consisted of: $\begin{array} { l l } \text { Share Capital } & \$ 35,000 \\ \text { Retained Earnings } & \$ 15,000 \end{array}$ During the year ended 30 June 2009, S Limited paid an interim dividend of $5 000 from profits earned before 1 July 2008. -The pre-acquisition elimination entry at 30 June 2009 is:

A) $\begin{array} { c l l l } \text { Opening Retained earnings } & \mathrm { Dr } & 10,000 & \\ \text { Share capital } & \mathrm { Dr } & 35,000 & \\ \text { Shares in S Limited } & \mathrm { Cr } & 45,000 \end{array}$ B) $\begin{array} { l l l l } \text { Opening Retained earnings } & \mathrm { Dr } & 15,000 & \\ \text { Share capital } & \mathrm { Dr } & 35,000 & \\ \text { Shares in S Limited } & \mathrm { Cr } & 50,000 \end{array}$ C) $\begin{array} { l l r l } \text { Opening Retained earnings } & \mathrm { Dr } & 10,000 & \\ \text { Share capital } & \mathrm { Dr } & 35,000 & \\ \text { Dividends payable } & \mathrm { Dr } & 5,000 & \\ \quad \text { Shares in S Limited } & \mathrm { Cr } & 50,000 \end{array}$ D) $\begin{array} { l l l l } \text { Opening Retained earnings } & \mathrm { Dr } & 15,000 & \\ \text { Share capital } & \mathrm { Dr } & 35,000 & \\ \text { Shares in S Limited } & \mathrm { Cr } & & 45,000 \\ \text { Dividends paid } & \mathrm { Cr } & & 5,000 \end{array}$ A) $\begin{array} { c l l l } \text { Opening Retained earnings } & \mathrm { Dr } & 10,000 & \\ \text { Share capital } & \mathrm { Dr } & 35,000 & \\ \text { Shares in S Limited } & \mathrm { Cr } & 45,000 \end{array}$ B) $\begin{array} { l l l l } \text { Opening Retained earnings } & \mathrm { Dr } & 15,000 & \\ \text { Share capital } & \mathrm { Dr } & 35,000 & \\ \text { Shares in S Limited } & \mathrm { Cr } & 50,000 \end{array}$ C) $\begin{array} { l l r l } \text { Opening Retained earnings } & \mathrm { Dr } & 10,000 & \\ \text { Share capital } & \mathrm { Dr } & 35,000 & \\ \text { Dividends payable } & \mathrm { Dr } & 5,000 & \\ \quad \text { Shares in S Limited } & \mathrm { Cr } & 50,000 \end{array}$ D) $\begin{array} { l l l l } \text { Opening Retained earnings } & \mathrm { Dr } & 15,000 & \\ \text { Share capital } & \mathrm { Dr } & 35,000 & \\ \text { Shares in S Limited } & \mathrm { Cr } & & 45,000 \\ \text { Dividends paid } & \mathrm { Cr } & & 5,000 \end{array}$

All parent entities are required to present consolidated financial statements unless the following conditions apply to them: $\begin{array}{|l|l|} \hline \text { I. } & \text { The parent is a wholly owned subsidiary. } \\ \hline \text { II. } & \begin{array}{l} \text { The parent is a partly owned subsidiary and its owners do not object to the } \\ \text { non-presentation of consolidated financial statements. } \end{array} \\ \hline \text { III. } & \text { The parent's debt or equity securities are traded in a public market. } \\ \hline \text { IV. } & \begin{array}{l} \text { The parent is not in the process of applying to issue any securities in a } \\ \text { public market. } \end{array} \\ \hline \end{array}$

A) I and II only B) I, II and III only C) I, II and IV only D) I, II, III and IV. A) I and II only B) I, II and III only C) I, II and IV only D) I, II, III and IV.

Exam 25: Consolidation: Principles and Accounting Requirements

When a dividend is paid by a wholly-owned subsidiary out of pre-acquisition equity, the parent entity recognises: This is explained more in Chapter 26.

Free

(Multiple Choice)

4.9/5

(34)

Question 1

Correct Answer:

Verified

According to AASB 10 Consolidated Financial Statements, the following factors indicate the existence of control: I. The power to govern the financial policies of an entity so as to obtain benefits. II. Shared power in the govemance of financial and operating policies of another entity so as to obtain benefits. III. The power to goven the operating policies of an entity so as to obtain benefits. IV. Ownership of more than 50\% of the voting power in the subsidiary.

Free

(Multiple Choice)

4.8/5

(39)

Question 2

Correct Answer:

Verified

Use the following information to answer questions On 1 July 2008, P Limited acquired all the issued shares of S Limited for $50 000 when the equity of S Limited consisted of: Share Capital \ 35,000 Retained Earnings \ 15,000 During the year ended 30 June 2009, S Limited paid an interim dividend of $5 000 from profits earned before 1 July 2008. -The pre-acquisition elimination entry at 1 July 2008 is:

Free

(Multiple Choice)

4.7/5

(41)

Question 3

Correct Answer:

Verified

One year after acquisition date, the goodwill acquired was regarded as having become impaired by $20 000. The appropriate consolidation adjustment in relation to the impairment will include the following line: a. DR Goodwill \ 20000 b. DR Share capital \ 20000 c. CR Business combination valuation reserve \ 20000 d. CR Accumulated impairment losses \ 20000.

(Short Answer)

4.9/5

(35)

Question 4

When a parent recognises a pre-acquisition dividend that is declared by a wholly-owned subsidiary it makes the following entry in its accounting records: This is explained more in Chapter 26.

(Multiple Choice)

4.7/5

(40)

Question 5

For entities wanting to use the cost model of accounting, the revaluation of a subsidiary's assets would be undertaken in the:

(Multiple Choice)

4.9/5

(41)

Question 6

Truong Limited acquired 60% of the shares of Quang Limited through the Australian Securities Exchange. The share acquisition cost Truong Limited $500 000. As a result of the share acquisition, Truong Limited gained control over Quang Limited. In its accounting records, Truong will recognise:

(Multiple Choice)

4.9/5

(39)

Question 7

In a consolidated group of entities, control over the subsidiaries in the group:

(Multiple Choice)

4.9/5

(35)

Question 8

AASB 10 Consolidated Financial Statements defines a 'parent entity' and a 'subsidiary entity' as: The original answer was (a), which I think is incorrect. The correct answer should be (c). parent Subsidiary I An entity which owns more than 40\% of the voting shares of another entity An entity in which another entity owns more than 40\% of the voting shares II An entity which owns more than 20\% of the voting shares of another entity An entity which is owned partly by another entity III An entity that has one or more subsidiaries An entity which is controlled by a parent entity IV An entity that controls another entity An entity in which the parent entity owns more than 20\% of the voting shares

(Multiple Choice)

4.7/5

(32)

Question 9

Use the following information to answer questions On 1 July 2008, P Limited acquired all the issued shares of S Limited for $50 000 when the equity of S Limited consisted of: Share Capital \ 35,000 Retained Earnings \ 15,000 During the year ended 30 June 2009, S Limited paid an interim dividend of $5 000 from profits earned before 1 July 2008. -The pre-acquisition elimination entry at 30 June 2009 is:

(Multiple Choice)

4.9/5

(32)

Question 10

At acquisition date a wholly-owned subsidiary had the following equity items: Retained earnings $14 000 Share capital $30 000 General reserve $ 6 000 In the year following the acquisition the subsidiary transferred $10 000 from pre-acquisition retained earnings, to the general reserve account. At the reporting date following the reserve transfer, the following consolidation adjustment is needed:

(Multiple Choice)

4.9/5

(27)

Question 11

Use the following information to answers Edward Ltd acquires all issued shares in Jacob Ltd for $220 000 paid in cash. Equity of Jacob Ltd consists of $130 000 share capital and $45 000 retained earnings. At acquisition date, Jacob Ltd owns a block of land, which it initially purchased at $200 000. The fair value of the land is $240 000. The carrying amount of Jacob Ltd's property, plant and equipment is $130 000 with accumulated depreciation of $55 000. The fair value of the property, plant and equipment is $95 000. -Which of the following statements is correct about the above business combination?

(Multiple Choice)

4.7/5

(30)

Question 12

If the cost of a business combination is greater than the acquired interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree:

(Multiple Choice)

4.9/5

(36)

Question 13

The key characteristic that determines which entities financial statements should be combined into a set of consolidated financial statements is:

(Multiple Choice)

4.8/5

(30)

Question 14

Company X acquired Company Y when the carrying value of Company Y's plant was $50 000. The fair value of the plant on acquisition date was $65 000. The company tax rate was 30%. How much is the amount of the business combination valuation reserve that must be recognised?

(Multiple Choice)

5.0/5

(39)

Question 15

Use the following information to answers Edward Ltd acquires all issued shares in Jacob Ltd for $220 000 paid in cash. Equity of Jacob Ltd consists of $130 000 share capital and $45 000 retained earnings. At acquisition date, Jacob Ltd owns a block of land, which it initially purchased at $200 000. The fair value of the land is $240 000. The carrying amount of Jacob Ltd's property, plant and equipment is $130 000 with accumulated depreciation of $55 000. The fair value of the property, plant and equipment is $95 000. -If the tax rate is 30%, what would be the amount of Business Combination Value Reserve that must be recognised at the acquisition date?

(Multiple Choice)

4.8/5

(38)

Question 16

All parent entities are required to present consolidated financial statements unless the following conditions apply to them: I. The parent is a wholly owned subsidiary. II. The parent is a partly owned subsidiary and its owners do not object to the non-presentation of consolidated financial statements. III. The parent's debt or equity securities are traded in a public market. IV. The parent is not in the process of applying to issue any securities in a public market.

(Multiple Choice)

4.7/5

(37)

Question 17

On 1 March Black Ltd acquired all shares of White Ltd for $100 000. Black Ltd paid $60 000 cash and issued 10 000 shares to White Ltd as a consideration. Black Ltd's shares are trading in the market at $4 per share on 1 March. What are the journal entries recorded by Black Ltd at the acquisition date?

(Multiple Choice)

4.9/5

(42)

Question 18

Which of the following events can cause a change in the pre-acquisition elimination entry Subsequent to acquisition date?

(Multiple Choice)

4.8/5

(36)

Question 19

Eeny Limited has two subsidiary entities, Meeny Limited and Miney Limited. Eeny Limited owns 100% of the shares in both entities. Details of issued share capital are: I changed the share capital figures because they are exactly the same as in Q10 of the SPQ. Eeny Limited $150 000 Meeny Limited $45 000 Miney Limited $22 500 The consolidated share capital amount of the Eeny Meeny Miney Group is:

(Multiple Choice)

4.8/5

(37)

Question 20

Showing 1 - 20 of 30

When a dividend is paid by a wholly-owned subsidiary out of pre-acquisition equity, the parent entity recognises: This is explained more in Chapter 26.

When a parent recognises a pre-acquisition dividend that is declared by a wholly-owned subsidiary it makes the following entry in its accounting records: This is explained more in Chapter 26.

For entities wanting to use the cost model of accounting, the revaluation of a subsidiary's assets would be undertaken in the:

Truong Limited acquired 60% of the shares of Quang Limited through the Australian Securities Exchange. The share acquisition cost Truong Limited $500 000. As a result of the share acquisition, Truong Limited gained control over Quang Limited. In its accounting records, Truong will recognise:

In a consolidated group of entities, control over the subsidiaries in the group:

If the cost of a business combination is greater than the acquired interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree:

The key characteristic that determines which entities financial statements should be combined into a set of consolidated financial statements is:

Company X acquired Company Y when the carrying value of Company Y's plant was $50 000. The fair value of the plant on acquisition date was $65 000. The company tax rate was 30%. How much is the amount of the business combination valuation reserve that must be recognised?

Which of the following events can cause a change in the pre-acquisition elimination entry Subsequent to acquisition date?

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: Intragroup Transactions

Consolidation: Non Controlling Interest

Joint Arrangements

Associates and Joint Ventures

Filters