Deck 23: Indirect Interest

Question 1

Thorpe Ltd owns 70% of the issued share capital of Perkins Ltd.Perkins Ltd owns 80% of the issued share capital of Hackett Ltd and 60% of the issued share capital of Klim Ltd.For the year ended 31 December 20X0 each company reported the following profits/(losses):
Thorpe Ltd(800 000)
Perkins Ltd(600 000)
Hackett Ltd700 000
Klim Ltd700 000
A Ltd acquires 60% of B Ltd in 20X5.B Ltd has held a 70% interest in C Ltd since 20X0.In 20X4 the B group recorded $20 000 of consolidation goodwill impairment expense in respect of the C Ltd acquisition.Which of the following statements is true?

A)$12 000 of the B group impairment expense effectively disappears in the A group consolidation
B)The A group will recognise $20 000 of impairment expense
C)NCI of B group will not be assigned any impairment expense
D)None of the above is true

Answer 1

A

Question 2

Mount Ltd owns 60% of the issued share capital of Tom Ltd and 70% of the issued share capital of Price Ltd.Tom Ltd owns 90% of the issued capital of Karatha Ltd and 60% of the issued share capital of Roeburn Ltd.
What is the NCI's indirect interest in Karatha Ltd?

A)24%
B)36%
C)46%
D)54%

Answer 2

B

Question 3

$\begin{array} { l c c c } & \begin{array} { c } \text { Piano Ltd } \\\text { \$ millions }\end{array} & \begin{array} { c } \text { Billy Ltd } \\\text { \$ millions }\end{array} & \begin{array} { c } \text { Man Ltd } \\\text { \$ millions }\end{array} \\\text { Retained profits } & 2300 & 800 & 500 \\\text { Paid-up capital } & 2700 & 400 & 300 \\\text { 1 Jan 20X0 Total } & \mathbf { 5 0 0 0 } & \mathbf { 1 } 200 & \mathbf { 8 0 0 } \\\text { Retained profits } & 4300 & 1200 & 600 \\\text { Paid-up capital } & 2700 & 400 & 300 \\\text { 1 Jan 20X2 Total } & 7 \mathbf { 0 0 0 } & \mathbf { 1 6 0 0 } & \mathbf { 9 0 0 }\end{array}$

-On 1 January 20X0, Piano Ltd acquired 100% of the issued capital of Billy Ltd by paying $1 600 million cash.On 1 January 20X2, Billy Ltd acquired 100% of the issued capital of Man Ltd by paying $1 000 million cash.At these two dates, the fair values of equity of the companies is shown in the above table.
How much goodwill was acquired by each company?

A)
$\begin{array}{llcc} \text { Piano Ltd \$ millions } & 0 \\ \text { Billy Ltd \$ millions } &200\\\end{array}$


B)
$\begin{array}{llcc} \text { Piano Ltd \$ millions } & 400\\ \text { Billy Ltd \$ millions } &200\\\end{array}$



C)
$\begin{array}{llcc} \text { Piano Ltd \$ millions } &40 0 \\ \text { Billy Ltd \$ millions } &100\\\end{array}$


D)
$\begin{array}{llcc} \text { Piano Ltd \$ millions } & 0 \\ \text { Billy Ltd \$ millions } &100\\\end{array}$

Answer 3

$\begin{array}{llcc} \text { Piano Ltd \$ millions } &40 0 \\ \text { Billy Ltd \$ millions } &100\\\end{array}$

Question 4

Thorpe Ltd owns 70% of the issued share capital of Perkins Ltd.Perkins Ltd owns 80% of the issued share capital of Hackett Ltd and 60% of the issued share capital of Klim Ltd.For the year ended 31 December 20X0 each company reported the following profits/(losses):
$\begin{array} { l c } & \$ \\\text { Thorpe Ltd } & ( 800000 ) \\\text { Perkins Ltd } & ( 600000 ) \\\text { Hackett Ltd } & 700000 \\\text { Klim Ltd } & 700000\end{array}$

-What is the amount of the ultimate parent shareholders' indirect interest in Perkins Ltd's net result for this financial year?

A)$600 000 loss
B)$490 000 loss
C)$420 000 loss
D)Nil

Question 5

Under AASB 127 all consolidation differences and related costs must be assigned to the ultimate parent in the partial method.

Question 6

A parent company can have direct and indirect interests simultaneously in a subsidiary but NCI can not have both direct and indirect interests.

Question 7

Consolidated statements include post-control reserves and profits of subsidiaries.In general, these are:
1.for a subsidiary, the equities it generates after it is acquired; and
2.for a sub-subsidiary, the equities it generates after it is acquired or its parent is acquired, whichever is the later.

Question 8

$\begin{array} { l c c c } & \begin{array} { c } \text { Piano Ltd } \\\text { \$ millions }\end{array} & \begin{array} { c } \text { Billy Ltd } \\\text { \$ millions }\end{array} & \begin{array} { c } \text { Man Ltd } \\\text { \$ millions }\end{array} \\\text { Retained profits } & 2300 & 800 & 500 \\\text { Paid-up capital } & 2700 & 400 & 300 \\\text { 1 Jan 20X0 Total } & \mathbf { 5 0 0 0 } & \mathbf { 1 } 200 & \mathbf { 8 0 0 } \\\text { Retained profits } & 4300 & 1200 & 600 \\\text { Paid-up capital } & 2700 & 400 & 300 \\\text { 1 Jan 20X2 Total } & 7 \mathbf { 0 0 0 } & \mathbf { 1 6 0 0 } & \mathbf { 9 0 0 }\end{array}$

-On 1 January 20X0, Billy Ltd acquired 100% of the issued capital of Man Ltd by paying $1 000 million cash.On 1 January 20X2, Piano Ltd acquired 100% of the issued capital of Billy Ltd by paying $1 600 million cash.At these two dates, the fair value of equity of the companies is shown in the above table.
How much goodwill was acquired by each company if the partial method is applied?

A)
$\begin{array}{llcc} \text { Piano Ltd \$ millions } & 0 \\ \text { Billy Ltd \$ millions } &200\\\end{array}$


B)
$\begin{array}{llcc} \text { Piano Ltd \$ millions } & 400 \\ \text { Billy Ltd \$ millions } &200\\\end{array}$


C)
$\begin{array}{l}\text { Piano Ltd } \$ \text { millions } \quad 200\\\text { Billy Ltd \$ millions } \quad 400\end{array}$
D)
$\begin{array}{llcc} \text { Piano Ltd \$ millions } & 0 \\ \text { Billy Ltd \$ millions } &100\\\end{array}$

Question 9

Mount Ltd owns 60% of the issued share capital of Tom Ltd and 70% of the issued share capital of Price Ltd.Tom Ltd owns 90% of the issued capital of Karatha Ltd and 60% of the issued share capital of Roeburn Ltd.
What is the direct NCI in Roeburn Ltd?

A)64%
B)60%
C)40%
D)0

Question 10

Mount Ltd owns 60% of the issued share capital of Tom Ltd and 70% of the issued share capital of Price Ltd.Tom Ltd owns 90% of the issued capital of Karatha Ltd and 60% of the issued share capital of Roeburn Ltd.
What is the ultimate parent shareholders' direct interest in Karatha Ltd?

A)0
B)36%
C)42%
D)60%

Question 11

Thorpe Ltd owns 70% of the issued share capital of Perkins Ltd.Perkins Ltd owns 80% of the issued share capital of Hackett Ltd and 60% of the issued share capital of Klim Ltd.For the year ended 31 December 20X0 each company reported the following profits/(losses):
$\begin{array} { l c } & \$ \\\text { Thorpe Ltd } & ( 800000 ) \\\text { Perkins Ltd } & ( 600000 ) \\\text { Hackett Ltd } & 700000 \\\text { Klim Ltd } & 700000\end{array}$

-What is the amount of the total NCI in Klim Ltd's net result for this financial year?

A)$420 000 profit
B)$406 000 profit
C)$490 000 profit
D)$280 000 profit

Question 12

Assignment of goodwill and related costs to the ultimate parent is consistent with the synergy explanation for goodwill.

Question 13

Thorpe Ltd owns 70% of the issued share capital of Perkins Ltd.Perkins Ltd owns 80% of the issued share capital of Hackett Ltd and 60% of the issued share capital of Klim Ltd.For the year ended 31 December 20X0 each company reported the following profits/(losses):
$\begin{array} { l c } & \$ \\\text { Thorpe Ltd } & ( 800000 ) \\\text { Perkins Ltd } & ( 600000 ) \\\text { Hackett Ltd } & 700000 \\\text { Klim Ltd } & 700000\end{array}$

-What is the amount of the ultimate parent shareholders' interest in Klim Ltd's profit for this financial year?

A)$280 000
B)$294 000
C)$392 000
D)$420 000

Question 14

Thorpe Ltd owns 70% of the issued share capital of Perkins Ltd.Perkins Ltd owns 80% of the issued share capital of Hackett Ltd and 60% of the issued share capital of Klim Ltd.For the year ended 31 December 20X0 each company reported the following profits/(losses):
$\begin{array} { l c } & \$ \\\text { Thorpe Ltd } & ( 800000 ) \\\text { Perkins Ltd } & ( 600000 ) \\\text { Hackett Ltd } & 700000 \\\text { Klim Ltd } & 700000\end{array}$

-What are the amounts of the NCI's direct and indirect interest in Hackett Ltd's profit for this financial year?

A)
$\begin{array}{ll}\text { Direct (\$) } & \text { Indirect (\$) } \\140000 & 168000\end{array}$

B)
$\begin{array} { l l } \text { Direct (\$) } & \text { Indirect (\$) } \\140000 & 392000\end{array}$
C)
$\begin{array} { l l } \text { Direct (\$) } & \text { Indirect (\$) } \\168000 & 140000\end{array}$
D)
$\begin{array} { l l } \text { Direct (\$) } & \text { Indirect (\$) } \\168000 & 392000\end{array}$

Question 15

Mount Ltd owns 60% of the issued share capital of Tom Ltd and 70% of the issued share capital of Price Ltd.Tom Ltd owns 90% of the issued capital of Karatha Ltd and 60% of the issued share capital of Roeburn Ltd.
What is the NCI's indirect interest in Roeburn Ltd?

A)40%
B)24%
C)60%
D)36%

Question 16

The NCI of a middle-tier subsidiary are NCI as regards the principal group but parent shareholders as regards the nested group.