Question 1

In a business combination,equity instruments issued as part of the purchase consideration should be measured at their original issue price.

Accepted Answer

A) True 
 B)False

Question 2

In a business combination,the acquiree is the business that:

Accepted Answer

A) finances the business combination. 
B) the acquirer obtains control of in a business combination. 
C) obtains control of the acquiree. 
D) pays the acquisition consideration. 
A) finances the business combination. 
B) the acquirer obtains control of in a business combination. 
C) obtains control of the acquiree. 
D) pays the acquisition consideration.

Question 3

Property,plant and equipment and investments are both examples of monetary assets.

Accepted Answer

A) True 
 B)False

Question 4

Under AASB 3 Business Combinations,the required method of accounting for a business combination is the:

Accepted Answer

A) control method. 
B) acquisition method. 
C) purchase method. 
D) combination method. 
A) control method. 
B) acquisition method. 
C) purchase method. 
D) combination method.

Question 5

Ying Limited acquires the net assets of Yang Limited for a cash consideration of $50 000.One half is to be paid on acquisition date and one half is payable in one year's time.The appropriate discount rate is 5% p.a.The present value of the cash outflow in one year's time is:

Accepted Answer

A) $23 810. 
B) $25 000. 
C) $26 190. 
D) $30 000. 
A) $23 810. 
B) $25 000. 
C) $26 190. 
D) $30 000.

Question 6

A business combination is defined in AASB 3 as a transaction:

Accepted Answer

A) in which an acquiree obtains control of one or more businesses. 
B) in which one entity obtains significant influence over one or more other entities. 
C) or other event in which an acquirer obtains control of one or more businesses. 
D) or other event in which an entity obtains control of one or more businesses. 
A) in which an acquiree obtains control of one or more businesses. 
B) in which one entity obtains significant influence over one or more other entities. 
C) or other event in which an acquirer obtains control of one or more businesses. 
D) or other event in which an entity obtains control of one or more businesses.

Question 7

Which of the following statements in relation to contingent consideration is incorrect?

Accepted Answer

A) At acquisition date,contingent consideration is measured at fair value. 
B) Where the contingent consideration is classified as equity,there is no remeasurement required on settlement. 
C) Subsequent adjustments to contingent consideration affect the goodwill calculated at acquisition date. 
D) Changes in the amount of an expected cashflow where the contingent consideration represents a liability that is within the scope of AASB 137 are accounted for through profit and loss. 
A) At acquisition date,contingent consideration is measured at fair value. 
B) Where the contingent consideration is classified as equity,there is no remeasurement required on settlement. 
C) Subsequent adjustments to contingent consideration affect the goodwill calculated at acquisition date. 
D) Changes in the amount of an expected cashflow where the contingent consideration represents a liability that is within the scope of AASB 137 are accounted for through profit and loss.

Question 8

The two types of contingent liabilities are:

Accepted Answer

A) current obligations and non-current obligations. 
B) present obligations and possible obligations. 
C) present obligations and impossible obligations. 
D) future obligations and possible obligations. 
A) current obligations and non-current obligations. 
B) present obligations and possible obligations. 
C) present obligations and impossible obligations. 
D) future obligations and possible obligations.

Question 9

How many input levels does AASB 13 Fair Value Measurement identify for the inputs to the valuation techniques?

Accepted Answer

A) 2 
B) 6 
C) 4 
D) 3 
A) 2 
B) 6 
C) 4 
D) 3

Question 10

Apha Limited acquired the net assets of Beta Limited.Alpha Limited provided an item of equipment as part of the consideration.The fair value of the equipment was $26 000.It cost $40 000 and had a carrying amount of $24 000.Which of the following entries appropriately reflects the gain or loss on the equipment?

Accepted Answer

A) DR Loss on sale $2000 
B) CR Loss on sale $2000 
C) CR Gain on sale $2000 
D) Dr Gain on sale $2000. 
A) DR Loss on sale $2000 
B) CR Loss on sale $2000 
C) CR Gain on sale $2000 
D) Dr Gain on sale $2000.

Question 11

Newspaper mastheads are an example of a marketing-related intangible asset.

Accepted Answer

A) True 
 B)False

Question 12

Where the acquirer purchases the assets and assumes the liabilities of another entity,it does not need to consider the measurement of:

Accepted Answer

A) the liabilities assumed. 
B) the identifiable assets. 
C) the equity of the acquiree. 
D) goodwill or a gain from bargain purchase. 
A) the liabilities assumed. 
B) the identifiable assets. 
C) the equity of the acquiree. 
D) goodwill or a gain from bargain purchase.

Question 13

The acquisition date is the date on which the contract between the acquirer and acquire is signed.

Accepted Answer

A) True 
 B)False

Question 14

Maroons Limited acquired the net assets and contingent liabilities of Lewis Limited for $60 000.Lewis Limited's net assets and contingent liabilities were: total assets $84 000; total liabilities $10 000; and contingent liabilities $12 000.Maroons Limited will record a:

Accepted Answer

A) goodwill of $2000. 
B) gain on bargain purchase of $2000. 
C) goodwill of $14 000. 
D) gain on bargain purchase of $60 000. 
A) goodwill of $2000. 
B) gain on bargain purchase of $2000. 
C) goodwill of $14 000. 
D) gain on bargain purchase of $60 000.

Question 15

Subsequent to initial recognition,goodwill acquired under a business combination may be revalued.

Accepted Answer

A) True 
 B)False

Question 16

For a deferred payment,the fair value to the acquirer is the amount the entity would have to borrow to settle the debt in the future.

Accepted Answer

A) True 
 B)False

Question 17

The cost approach to determining fair value involves:

Accepted Answer

A) determining an amount which reflects the amount currently needed to replace the service capacity of an asset. 
B) using prices generated by market transactions involving identical or comparable assets or liabilities. 
C) converting future amounts such as cash flows to a current,discounted amount. 
D) none of the above. 
A) determining an amount which reflects the amount currently needed to replace the service capacity of an asset. 
B) using prices generated by market transactions involving identical or comparable assets or liabilities. 
C) converting future amounts such as cash flows to a current,discounted amount. 
D) none of the above.

Question 18

The use of estimates when measuring the fair values of assets results that the measures are unreliable.

Accepted Answer

A) True 
 B)False

Question 19

AASB 3 Business Combinations requires disclosure of 'a qualitative description of the factors that make up goodwill recognised,such as expected synergies from combining operations of the acquiree and the acquirer,intangible assets that do not qualify for separate recognition or other factors'.

Accepted Answer

A) True 
 B)False

Question 20

Where an acquiree liquidates,the balance of the Shareholders' Distribution account is transferred to the Liquidation account.

Accepted Answer

A) True 
 B)False

Exam 12: Business Combinations

In a business combination,equity instruments issued as part of the purchase consideration should be measured at their original issue price.

In a business combination,the acquiree is the business that:

Property,plant and equipment and investments are both examples of monetary assets.

Under AASB 3 Business Combinations,the required method of accounting for a business combination is the:

Ying Limited acquires the net assets of Yang Limited for a cash consideration of $50 000.One half is to be paid on acquisition date and one half is payable in one year's time.The appropriate discount rate is 5% p.a.The present value of the cash outflow in one year's time is:

A business combination is defined in AASB 3 as a transaction:

Which of the following statements in relation to contingent consideration is incorrect?

The two types of contingent liabilities are:

How many input levels does AASB 13 Fair Value Measurement identify for the inputs to the valuation techniques?

Newspaper mastheads are an example of a marketing-related intangible asset.

Where the acquirer purchases the assets and assumes the liabilities of another entity,it does not need to consider the measurement of:

The acquisition date is the date on which the contract between the acquirer and acquire is signed.

Maroons Limited acquired the net assets and contingent liabilities of Lewis Limited for $60 000.Lewis Limited's net assets and contingent liabilities were: total assets $84 000; total liabilities $10 000; and contingent liabilities $12 000.Maroons Limited will record a:

Subsequent to initial recognition,goodwill acquired under a business combination may be revalued.

For a deferred payment,the fair value to the acquirer is the amount the entity would have to borrow to settle the debt in the future.

The cost approach to determining fair value involves:

The use of estimates when measuring the fair values of assets results that the measures are unreliable.

AASB 3 Business Combinations requires disclosure of 'a qualitative description of the factors that make up goodwill recognised,such as expected synergies from combining operations of the acquiree and the acquirer,intangible assets that do not qualify for separate recognition or other factors'.

Where an acquiree liquidates,the balance of the Shareholders' Distribution account is transferred to the Liquidation account.

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

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

Consolidation: Other Issues

Associates and Joint Ventures

Investments in Joint Arrangements

Insolvency and Liquidation

Filters