Question 1

Consider the following economic entity structure:

The direct non-controlling interest (DNCI)and indirect non-controlling interest (INCI)are as follows.

Accepted Answer

A

Question 2

The NCI share of equity is calculated on the recorded equity of the subsidiary.

Accepted Answer

A) True 
 B)False  False

Question 3

When a parent acquires an additional interest in a subsidiary,the change in ownership interest in account for as an adjustment against goodwill.

Accepted Answer

A) True 
 B)False  False

Question 4

The process of consolidation is not affected by the fact that acquisitions of subsidiaries may be non-sequential.

Accepted Answer

A) True 
 B)False

Question 5

Alpha Limited acquired shares in Bravo Limited.At the time of this acquisition Bravo Limited already held shares in Charlie Limited.This form of acquisition of an indirect ownership interest,by Alpha Limited in Charlie Limited,is known as a/an:

Accepted Answer

A) inconsequential acquisition. 
B) indirect acquisition. 
C) non-sequential acquisition. 
D) unorthodox acquisition. 
A) inconsequential acquisition. 
B) indirect acquisition. 
C) non-sequential acquisition. 
D) unorthodox acquisition.

Question 6

In a group that has a multiple subsidiary structure,the direct non-controlling interest is entitled to:

Accepted Answer

A) a proportionate share of post-acquisition equity only. 
B) a proportionate share of pre-acquisition equity only. 
C) a proportionate share of both pre-acquisition and post-acquisition equity. 
D) no share of post-acquisition equity. 
A) a proportionate share of post-acquisition equity only. 
B) a proportionate share of pre-acquisition equity only. 
C) a proportionate share of both pre-acquisition and post-acquisition equity. 
D) no share of post-acquisition equity.

Question 7

When calculating the direct non-controlling interest share of equity,consolidation adjustments are needed to:

Accepted Answer

A) eliminate any realised profits or losses from inventory transfers. 
B) recognise any unrealised profits or losses from intragroup service transfers. 
C) fully eliminate any unrealised profits or losses from intragroup transactions. 
D) partially eliminate any unrealised profits from inventory transfers. 
A) eliminate any realised profits or losses from inventory transfers. 
B) recognise any unrealised profits or losses from intragroup service transfers. 
C) fully eliminate any unrealised profits or losses from intragroup transactions. 
D) partially eliminate any unrealised profits from inventory transfers.

Question 8

Reciprocal shareholdings exist when:

Accepted Answer

A) a parent owns shares in a subsidiary. 
B) a subsidiary owns shares in a parent only. 
C) a parent owns shares in a subsidiary and in a joint venture. 
D) a parent and a subsidiary own shares in each other. 
A) a parent owns shares in a subsidiary. 
B) a subsidiary owns shares in a parent only. 
C) a parent owns shares in a subsidiary and in a joint venture. 
D) a parent and a subsidiary own shares in each other.

Question 9

The calculation of the direct NCI share of equity is the same as that for the indirect NCI share of equity.

Accepted Answer

A) True 
 B)False

Question 10

Reciprocal shareholdings exist when a parent and a subsidiary own shares in each other.

Accepted Answer

A) True 
 B)False

Question 11

An indirect non-controlling interest arises:

Accepted Answer

A) only when a wholly owned subsidiary owns shares in another subsidiary. 
B) when a partly owned subsidiary owns shares in the parent entity. 
C) when a wholly owned subsidiary owns shares in the parent entity. 
D) only when a partly owned subsidiary holds shares in another subsidiary. 
A) only when a wholly owned subsidiary owns shares in another subsidiary. 
B) when a partly owned subsidiary owns shares in the parent entity. 
C) when a wholly owned subsidiary owns shares in the parent entity. 
D) only when a partly owned subsidiary holds shares in another subsidiary.

Question 12

Which of the following can result in a loss of control by a parent over a subsidiary?

Accepted Answer

A) The parent sells some of the shares in the subsidiary. 
B) There is a change in the dispersion in the holding of shares by entities comprising the NCI. 
C) There may be a change in a contractual arrangement. 
D) All of the above. 
A) The parent sells some of the shares in the subsidiary. 
B) There is a change in the dispersion in the holding of shares by entities comprising the NCI. 
C) There may be a change in a contractual arrangement. 
D) All of the above.

Question 13

In a multiple subsidiary structure,the direct non-controlling interest is entitled to a proportionate share of:

Accepted Answer

A) pre-acquisition equity only. 
B) pre- and post-acquisition amounts of equity. 
C) post-acquisition amounts of equity only. 
D) post-acquisition balance of retained earnings only. 
A) pre-acquisition equity only. 
B) pre- and post-acquisition amounts of equity. 
C) post-acquisition amounts of equity only. 
D) post-acquisition balance of retained earnings only.

Question 14

Caloundra Limited has an 85% ownership interest in Minchinton Limited.Minchinton Limited has a 55% ownership interest in Moreton Limited.As a result of these ownership interests,there is a direct ownership interest in Moreton Limited amounting to:

Accepted Answer

A) 15%. 
B) 8%. 
C) 45%. 
D) 85%. 
A) 15%. 
B) 8%. 
C) 45%. 
D) 85%.

Question 15

The indirect NCI is entitled to a share of all movements in reserve accounts.

Accepted Answer

A) True 
 B)False

Question 16

In a multiple subsidiary structure,the indirect non-controlling interest is entitled to a proportionate share of:

Accepted Answer

A) pre-acquisition equity. 
B) post-acquisition equity only. 
C) both pre- and post-acquisition equity. 
D) neither pre- nor post-acquisition equity. 
A) pre-acquisition equity. 
B) post-acquisition equity only. 
C) both pre- and post-acquisition equity. 
D) neither pre- nor post-acquisition equity.

Question 17

The direct NCI receives a proportionate share of both pre and post-acquisition equity of the subsidiary.

Accepted Answer

A) True 
 B)False

Question 18

In non-sequential acquisitions,one of the assets of the acquired subsidiary for which the carrying amount may differ from fair value is its investments in its subsidiaries.

Accepted Answer

A) True 
 B)False

Question 19

Waratah Ltd acquired a 60% ownership interest in Bottle Brush Ltd on 30 June 20X5.On the same day,Bottle Brush Ltd acquired a 70% ownership interest in Honeydew Ltd.
The following interentity transactions have taken place between the entities in the group during the years ended 30 June 20X6 and 30 June 20X7.
On 1 July 20X5 Bottle Brush sold an item of plant to Honeydew for a profit of $20 000.The remaining useful life of the plant at the date of transfer was 4 years.
$\bullet$On 1 September 20X5,Honeydew paid a dividend of $70 000 from profits earned since 30 June 20X5.
$\bullet$Waratah lent $50 000 to Bottle Brush on 1 January 20X6.Interest charged on the loan for the year ended 30 June 20X6 was $2000 and for the year ended 30 June 20X7 was $4000.
On 31 May 20X6 Waratah sold inventory to Honeydew for $15 000.Profit earned on the sale was $5000.Honeydew sold the inventory to external parties on 1 August 20X6.
Details of profits earned by entities within the group for the years ended 30 June 20X6 and 30 June 20X7 are:
 
The tax rate is 30%.
The NCI share of profit in Bottle Brush for the year ended 30 June 20X6 is:

Accepted Answer

A) $11 600. 
B) $13 000. 
C) $13 800. 
D) $29 800. 
A) $11 600. 
B) $13 000. 
C) $13 800. 
D) $29 800.

Question 20

Consider the following economic entity structure.

60%
The indirect NCI in B Ltd is the same group of shareholders as the:

Accepted Answer

A) direct NCI in B Ltd. 
B) indirect NCI in A Ltd. 
C) direct NCI in A Ltd. 
D) shareholders in P Ltd. 
A) direct NCI in B Ltd. 
B) indirect NCI in A Ltd. 
C) direct NCI in A Ltd. 
D) shareholders in P Ltd.

Exam 22: Consolidation: Other Issues

Consider the following economic entity structure: The direct non-controlling interest (DNCI)and indirect non-controlling interest (INCI)are as follows.

The NCI share of equity is calculated on the recorded equity of the subsidiary.

When a parent acquires an additional interest in a subsidiary,the change in ownership interest in account for as an adjustment against goodwill.

The process of consolidation is not affected by the fact that acquisitions of subsidiaries may be non-sequential.

Alpha Limited acquired shares in Bravo Limited.At the time of this acquisition Bravo Limited already held shares in Charlie Limited.This form of acquisition of an indirect ownership interest,by Alpha Limited in Charlie Limited,is known as a/an:

In a group that has a multiple subsidiary structure,the direct non-controlling interest is entitled to:

When calculating the direct non-controlling interest share of equity,consolidation adjustments are needed to:

Reciprocal shareholdings exist when:

The calculation of the direct NCI share of equity is the same as that for the indirect NCI share of equity.

Reciprocal shareholdings exist when a parent and a subsidiary own shares in each other.

An indirect non-controlling interest arises:

Which of the following can result in a loss of control by a parent over a subsidiary?

In a multiple subsidiary structure,the direct non-controlling interest is entitled to a proportionate share of:

Caloundra Limited has an 85% ownership interest in Minchinton Limited.Minchinton Limited has a 55% ownership interest in Moreton Limited.As a result of these ownership interests,there is a direct ownership interest in Moreton Limited amounting to:

The indirect NCI is entitled to a share of all movements in reserve accounts.

In a multiple subsidiary structure,the indirect non-controlling interest is entitled to a proportionate share of:

The direct NCI receives a proportionate share of both pre and post-acquisition equity of the subsidiary.

In non-sequential acquisitions,one of the assets of the acquired subsidiary for which the carrying amount may differ from fair value is its investments in its subsidiaries.

Consider the following economic entity structure. 60% The indirect NCI in B Ltd is the same group of shareholders as the:

Nature and Regulation of Companies

Financing Company Operations

Company Operations

Fundamental Concepts of Corporate Governance

Fair Value Measurement

Accounting for Company Income Tax

Financial Instruments

Foreign Currency Transactions and Forward Exchange Contracts

Property, Plant and Equipment

Leases

Intangible Assets

Business Combinations

Impairment of Assets

Disclosure: Legal Requirements and Accounting Polices

Disclosure: Presentation of Financial Statements

Disclosure: Statement of Cash Flows

Disclosure: Translation of Financial Statements Into a Presentation Currency

Consolidation: Controlled Entities

Consolidation: Wholly Owned Subsidiaries

Consolidation: Intragroup Transactions

Consolidation: Non-Controlling Interest

Associates and Joint Ventures

Investments in Joint Arrangements

Insolvency and Liquidation

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