Question 1

The preparation of consolidated financial statements involves:

Accepted Answer

A) adding together the financial statements of the investor and the associate. 
B) adjusting entries in the accounting records of the subsidiary. 
C) adding together the financial statements of the parent and the subsidiaries. 
D) adjusting entries in the accounting records of the parent. 
A) adding together the financial statements of the investor and the associate. 
B) adjusting entries in the accounting records of the subsidiary. 
C) adding together the financial statements of the parent and the subsidiaries. 
D) adjusting entries in the accounting records of the parent. C

Question 2

If a revaluation of the subsidiary's assets is performed on consolidation,the subsidiary's assets are carried into the consolidated statement of financial position at:

Accepted Answer

A) net present value. 
B) current replacement cost. 
C) historical cost. 
D) fair value. 
A) net present value. 
B) current replacement cost. 
C) historical cost. 
D) fair value. D

Question 3

The pre-acquisition entry is necessary to:

Accepted Answer

A) avoid overstating the equity and net assets of the parent. 
B) record the 'Shares in subsidiary' account in the parents records. 
C) avoid overstating the equity and net assets of the group. 
D) avoid understating the equity and net assets of the group. 
A) avoid overstating the equity and net assets of the parent. 
B) record the 'Shares in subsidiary' account in the parents records. 
C) avoid overstating the equity and net assets of the group. 
D) avoid understating the equity and net assets of the group. C

Question 4

Unity Limited acquired 100% of the share capital of Bellvista Limited.Bellvista had issued share capital of $200 000.The book values of Bellvista Limited's assets were: buildings $100 000,machinery $120 000.The fair values of these assets were: buildings $180 000,machinery $140 000.The tax rate is 30%.The fair value of the identifiable net assets is:

Accepted Answer

A) $270 000. 
B) $220 000. 
C) $320 000. 
D) $200 000. 
A) $270 000. 
B) $220 000. 
C) $320 000. 
D) $200 000.

Question 5

Where at acquisition date the parent holds shares in the subsidiary that it has previously acquired,this investment must be revalued to fair value at acquisition date.

Accepted Answer

A) True 
 B)False

Question 6

Susan Limited has two subsidiary entities,Rachel Limited and Rebecca Limited.Susan Limited owns 100% of the shares in both entities.Details of the cash accounts of each company are: Susan Limited $200 000,Lemon Limited $60 000,Juice Limited $30 000.The balance of the consolidated cash account of the Susan Limited group is:

Accepted Answer

A) $290 000. 
B) $200 000. 
C) $260 000. 
D) $230 000. 
A) $290 000. 
B) $200 000. 
C) $260 000. 
D) $230 000.

Question 7

An acquisition analysis is prepared at acquisition date to identify the fair values of the identifiable assets and liabilities of the parent.

Accepted Answer

A) True 
 B)False

Question 8

Kerri Limited has two subsidiary entities,Emily Limited and Georgia Limited.Kerri Limited owns 100% of the shares in both entities.Details of the issued share capital are:
- Kerri Limited $200 000
- Emily Limited $60 000
- Georgia Limited $30 000
The consolidated share capital amount of the Kerri Emily Georgia group is:

Accepted Answer

A) $230 000. 
B) $90 000. 
C) $200 000. 
D) $290 000. 
A) $230 000. 
B) $90 000. 
C) $200 000. 
D) $290 000.

Question 9

When preparing the business combination valuation entries,there is no recognition of a deferred tax liability for goodwill.

Accepted Answer

A) True 
 B)False

Question 10

If the fair value of a depreciable asset is greater than the carrying amount,in the years subsequent to the acquisition date the depreciation expense recorded in the books of the subsidiary will be greater than that for the group.

Accepted Answer

A) True 
 B)False

Question 11

In relation to pre-acquisition of a subsidiary entity,which of the following events can cause a change in the pre-acquisition entry subsequent to acquisition date?
I Transfers to post-acquisition retained earnings.
II Depreciation on non-current assets.
III Transfers from pre-acquisition retained earnings.
IV Bonus dividends paid from pre-acquisition equity.

Accepted Answer

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

Question 12

On 1 July 2014 Good Ltd acquired a 100% interest in Life Ltd.At that time Life Ltd had goodwill of $10 000 recorded in its statement of financial position as a result of a previous business combination.The total goodwill arising on Good's acquisition of Life was $24 000.The goodwill to be recognised on consolidation as a result of Good's acquisition of Life is:

Accepted Answer

A) nil. 
B) $10 000. 
C) $14 000. 
D) $24 000. 
A) nil. 
B) $10 000. 
C) $14 000. 
D) $24 000.

Question 13

Water Limited acquired Boy Limited for a purchase consideration of $110 000.At acquisition date the fair value of the Boy Limited's Land asset was $80 000 and the carrying amount was $60 000.If the company tax rate is 30%,which of the following is the appropriate adjustment to recognise the tax effect of the business combination revaluation of land?

Accepted Answer

A) DR Deferred tax liability $6 000 
B) CR Deferred tax liability $6 000 
C) DR Deferred tax asset $6 000 
D) CR Deferred tax asset $6 000 
A) DR Deferred tax liability $6 000 
B) CR Deferred tax liability $6 000 
C) DR Deferred tax asset $6 000 
D) CR Deferred tax asset $6 000

Question 14

Where an investment in a subsidiary is acquired on an ex.div basis,the fair value of the consideration paid should exclude the amount of the dividend.

Accepted Answer

A) True 
 B)False

Question 15

In preparing the consolidated financial statements,no adjustments are made in the accounting records of the individual entities that comprise the group.

Accepted Answer

A) True 
 B)False

Question 16

Where the consideration transferred is less than the fair value of the identifiable net assets and contingent liabilities acquired,the item must be recognised in the consolidation worksheet as:

Accepted Answer

A) a transfer to the business combination valuation reserve. 
B) goodwill. 
C) an increase in the 'Shares in subsidiary' asset. 
D) a gain on bargain purchase. 
A) a transfer to the business combination valuation reserve. 
B) goodwill. 
C) an increase in the 'Shares in subsidiary' asset. 
D) a gain on bargain purchase.

Question 17

A post acquisition transfer between retained earnings and a general reserve will result in a corresponding change to the pre-acquisition entry.

Accepted Answer

A) True 
 B)False

Question 18

Where the carrying amount of a non-current asset is more than its fair value at the date of acquisition,the difference is reflected in the deferred tax liability in the business combination valuation entries.

Accepted Answer

A) True 
 B)False

Question 19

There is no recognition of a deferred tax item in respect to goodwill because it is a residual amount and the recognition of a deferred tax item would:

Accepted Answer

A) decrease the carrying amount of goodwill. 
B) increase the carrying amount of goodwill. 
C) decrease the profit on consolidation. 
D) increase the profit on consolidation. 
A) decrease the carrying amount of goodwill. 
B) increase the carrying amount of goodwill. 
C) decrease the profit on consolidation. 
D) increase the profit on consolidation.

Question 20

According to AASB 3 Business Combinations,the key principle relating to the disclosure of information about business combinations is to disclose information that:

Accepted Answer

A) enables financial statement users to evaluate the nature and financial effect of business combinations that occurred during the reporting period. 
B) enables the preparation of the consolidated financial statements in the most cost-effective manner. 
C) does not give an advantage to the competitors of a consolidated group. 
D) provides financial statement users with information about the parent entity only. 
A) enables financial statement users to evaluate the nature and financial effect of business combinations that occurred during the reporting period. 
B) enables the preparation of the consolidated financial statements in the most cost-effective manner. 
C) does not give an advantage to the competitors of a consolidated group. 
D) provides financial statement users with information about the parent entity only.

The preparation of consolidated financial statements involves:

If a revaluation of the subsidiary's assets is performed on consolidation,the subsidiary's assets are carried into the consolidated statement of financial position at:

The pre-acquisition entry is necessary to:

Where at acquisition date the parent holds shares in the subsidiary that it has previously acquired,this investment must be revalued to fair value at acquisition date.

An acquisition analysis is prepared at acquisition date to identify the fair values of the identifiable assets and liabilities of the parent.

When preparing the business combination valuation entries,there is no recognition of a deferred tax liability for goodwill.

If the fair value of a depreciable asset is greater than the carrying amount,in the years subsequent to the acquisition date the depreciation expense recorded in the books of the subsidiary will be greater than that for the group.

Where an investment in a subsidiary is acquired on an ex.div basis,the fair value of the consideration paid should exclude the amount of the dividend.

In preparing the consolidated financial statements,no adjustments are made in the accounting records of the individual entities that comprise the group.

Where the consideration transferred is less than the fair value of the identifiable net assets and contingent liabilities acquired,the item must be recognised in the consolidation worksheet as:

A post acquisition transfer between retained earnings and a general reserve will result in a corresponding change to the pre-acquisition entry.

Where the carrying amount of a non-current asset is more than its fair value at the date of acquisition,the difference is reflected in the deferred tax liability in the business combination valuation entries.

There is no recognition of a deferred tax item in respect to goodwill because it is a residual amount and the recognition of a deferred tax item would:

According to AASB 3 Business Combinations,the key principle relating to the disclosure of information about business combinations is to disclose information that:

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: Intragroup Transactions

Consolidation: Non-Controlling Interest

Consolidation: Other Issues

Associates and Joint Ventures

Investments in Joint Arrangements

Insolvency and Liquidation

Filters

Exam 19: Consolidation: Wholly Owned Subsidiaries

The preparation of consolidated financial statements involves:

If a revaluation of the subsidiary's assets is performed on consolidation,the subsidiary's assets are carried into the consolidated statement of financial position at:

The pre-acquisition entry is necessary to:

Where at acquisition date the parent holds shares in the subsidiary that it has previously acquired,this investment must be revalued to fair value at acquisition date.

An acquisition analysis is prepared at acquisition date to identify the fair values of the identifiable assets and liabilities of the parent.

When preparing the business combination valuation entries,there is no recognition of a deferred tax liability for goodwill.

If the fair value of a depreciable asset is greater than the carrying amount,in the years subsequent to the acquisition date the depreciation expense recorded in the books of the subsidiary will be greater than that for the group.

Where an investment in a subsidiary is acquired on an ex.div basis,the fair value of the consideration paid should exclude the amount of the dividend.

In preparing the consolidated financial statements,no adjustments are made in the accounting records of the individual entities that comprise the group.

Where the consideration transferred is less than the fair value of the identifiable net assets and contingent liabilities acquired,the item must be recognised in the consolidation worksheet as:

A post acquisition transfer between retained earnings and a general reserve will result in a corresponding change to the pre-acquisition entry.

Where the carrying amount of a non-current asset is more than its fair value at the date of acquisition,the difference is reflected in the deferred tax liability in the business combination valuation entries.

There is no recognition of a deferred tax item in respect to goodwill because it is a residual amount and the recognition of a deferred tax item would:

According to AASB 3 Business Combinations,the key principle relating to the disclosure of information about business combinations is to disclose information that:

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: Intragroup Transactions

Consolidation: Non-Controlling Interest

Consolidation: Other Issues

Associates and Joint Ventures

Investments in Joint Arrangements

Insolvency and Liquidation

Filters