Deck 27: Consolidation: Non Controlling Interest

Question 1

The non-controlling interest columns on a consolidation worksheet are used to:

A) adjust the amounts that have been recorded for intragroup revenue transactions
B) adjust the amounts that have been recorded for intragroup services
C) eliminate the recorded amounts of the non-controlling investment in the subsidiary
D) compile the amounts of non-controlling interest and parent share of particular line items.

Answer 1

D

Question 2

According to AASB 10 Consolidated Financial Statements, the term 'non-controlling interest' means:

A) the total equity of the combined group
B) the equity in the parent entity other than the portion owned by the subsidiary entity
C) the equity in the economic entity other than that which can be attributed to the subsidiary entity
D) equity in a subsidiary not attributable, directly or indirectly, to a parent.

Answer 2

D

Question 3

When preparing a set of consolidated financial statements, the pre-acquisition entry relates to:

A) both the parent and the non-controlling interest in the subsidiary
B) only the investment by the parent in the subsidiary
C) only the investment by the non-controlling interest in the subsidiary
D) the total investment by the parent in the subsidiary plus the after tax effect of the investment by the non-controlling interest.

Answer 3

B

Question 4

Lu Nan Limited acquired 70% of the share capital and reserves of Hui Limited for $36 000. Share capital was $18 000 and reserves amounted to $10 800. All assets and liabilities were recorded at fair value except plant which was recorded at $2500 below fair value. The company tax rate was 30%. The partial goodwill method is adopted by the group. The amount of goodwill acquired by Lu Nan Limited in this business combination was:

A) $8 640
B) $9 165
C) $10 800
D) $14 615.

Question 5

A non-controlling interest is entitled to a share of which of the following items?
I Equity of the group entity at acquisition date
II Current period profit or loss of the subsidiary entity
III Changes in equity of the subsidiary since acquisition date and the beginning of the financial period
IV Equity of the subsidiary at acquisition date

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

Question 6

Petros Limited is a subsidiary of Butros Limited. When Butros acquired its 60% interest, the retained earnings of Petros Limited were $20 000. At the beginning of the current period Petros Limited's retained earnings had increased to $50 000. Petros earned profit of $10 000 during the current period. The share of the non-controlling interest in the equity of Petros Limited at reporting date is:

A) $24 000
B) $32 000
C) $36 000
D) $48 000.

Question 7

Which of the followings is not the reason of why entities do not use the full goodwill method?
I made a change to the original question, as the original question is very similar to Q3.

A) Users of financial statements do not see any value in the reported NCI.
B) It is more costly to measure NCI at fair value.
C) It results in less reliable NCI information due to difficulties in measuring NCI at fair value.
D) There is not sufficient evidence to assess the marginal benefits of reporting the acquisition-date fair value of the NCI.

Question 8

Ownership interests in a subsidiary entity that do not belong to the parent entity are known as:

A) unowned interests
B) non-controlling interests
C) proprietary interests
D) pro rata ownership rights.

Question 9

In Sunrise Group's consolidation worksheet, the opening balance of Retained Earnings under 'Group' column shows a balance of $90 000. If there is a debit entry of $22 000 in the NCI column, the opening balance of Retained Earnings under 'Parent' column would be:
I made a change to the original question, as the original question is very similar to Q2 of the SPQ.

A) $112 000
B) $100 000
C) $ 68 000
D) $ 56 000.

Question 10

Xana Limited paid $110 000 for 60% of Yama Limited. At the date of acquisition Yama Limited had share capital of $100 000 and retained earnings of $50 000 and all of Yama Limited's assets and liabilities were recorded at fair value. The fair value of identifiable net assets acquired by Xana Limited amounted to:

A) $60 000
B) $90 000
C) $110 000
D) $150 000.

Question 11

When presenting a consolidated statement of financial position the non-controlling interest is:

A) presented separately within the non-current liability section;
B) presented as a separate component of total assets and total liabilities;
C) presented separately within the equity section;
D) shown as a separate portion of net assets.

Question 12

Company A Limited owns 90% of the share capital of Company B Limited. Company B Limited paid a dividend of $20 000 during the financial period. The adjustment entries in the consolidation worksheet for the dividend include:

A) DR Dividend revenue $18 000
B) DR Dividend revenue $20 000
C) DR Dividend payable $18 000
D) DR Dividend receivable $20 000.

Question 13

Jiminez Limited acquired 80% of the share capital and reserves of Mustang Limited for $180 000. Share capital was $100 000 and reserves amounted to $50 000. All assets and liabilities were recorded at fair value except buildings which was recorded at $10 000 below fair value. If the company tax rate was 30%, and the partial goodwill method was adopted, the NCI share of equity at the date of acquisition was:
27)4 Identify how the existence of an NCI affects the consolidation process, particularly in the measurement of goodwill.

A) $30 000
B) $31 400
C) $32 000
D) $36 000.

Question 14

Company A Limited owns 70% of the share capital of Company B Limited. Company B Limited paid a dividend of $10 000 during the financial period. The adjustment entries in the consolidation worksheet for the dividend include:

A) DR Dividend revenue $7 000
B) DR Dividend revenue $10 000
C) DR Dividend payable $7 000
D) DR Dividend payable $10 000.

Question 15

A non-controlling interest is a contributor of:

A) equity to a consolidated group;
B) debt to a consolidated group;
C) assets to a consolidated group;
D) profit to a consolidated group.

Question 16

Jiminez Limited acquired 80% of the share capital and reserves of Mustang Limited for $180 000. Share capital was $100 000 and reserves amounted to $50 000. All assets and liabilities were recorded at fair value except buildings which was recorded at $10 000 below fair value. The fair value of the NCI at the date of Jiminez's acquisition was
$35 000 and the full goodwill method is adopted by the group. If the company tax rate was 30%, the goodwill recorded in relation to this business combination amounts to:

A) $3 600
B) $23 000
C) $54 400
D) $58 000.

Question 17

During the current year, a partly-owned subsidiary has made a transfer from retained earnings to a general reserve. Which of the following lines would appear in the NCI journal relating to the current year transfer?

A) DR NCI
B) DR Retained earnings
C) CR General reserve
D) CR Transfer to general reserve

Question 18

Xin Limited paid $12 000 for 75% of Yan Limited. At the date of acquisition Yan Limited had equity as follows:
Share capital of $10 000
Retained earnings of $5000
Other reserves of $3000
All of Yan Limited's assets and liabilities were recorded at fair value. The fair value of identifiable net assets acquired by Xin Limited amounted to:

A) $9750
B) $12 000
C) $13 500
D) $18 000

Question 19

Under the full goodwill method:
I made a change to the original question, as the original question is very similar to Q3 of the SPQ.

A) the NCI does not get a share of any equity relating to goodwill.
B) only goodwill acquired by parent entity will be recognised.
C) the NCI is measured at the NCI's proportionate share of the acquiree's identifiable assets and liabilities.
D) acquired goodwill consists of both goodwill of the subsidiary and the premium paid by the parent to acquire control over the subsidiary.

Question 20

Non-controlling interest is classified, according to AASB 10 Consolidated Financial Statements, as:

A) part of the equity of the parent entity
B) part of the equity of the group
C) a liability of the parent entity
D) a liability of the group.

Question 21

Which of the following information relating to the NCI is not required to be disclosed in accordance with the AASB 12 Disclosure of Interests in Other Entities?

A) The proportion of ownership interests held by NCIs.
B) The profit or loss allocated to NCIs of the subsidiary during the reporting period.
C) The total number of shares owned by the NCIs.
D) The name of the subsidiary.

Question 22

Which of the following statements is correct?
I made a change to the original question, as the original question is very similar to Q22.

A) The NCI is not entitled to share the group's profit.
B) Transactions that do not affect profit will not give rise to an adjustment to the NCI.
C) All intragroup transactions have an impact on the NCI share of equity.
D) When parent entity sells inventory to its subsidiary, a consolidation adjustment needs to be recorded to reduce the NCI.

Question 23

A Ltd holds a 60% interest in B Ltd. A Ltd sells inventory to B Ltd during the year for $10 000. The inventory originally cost $7000. At the end of the year 50% of the inventory is still on hand. The tax rate is 30%. The NCI adjustment required in relation to this transaction is a debit of:

A) NIL
B) $420
C) $630
D) $1050.

Question 24

For a transaction to require an adjustment to the calculation of a non-controlling interest share of equity it must have which of the following characteristics:
I) The transaction must result in the subsidiary recording a profit or a loss.
II) After the transaction the other party (not the non-controlling party) must have on hand an asset on which unrealised profit is accrued.
III) The initial consolidation adjustment must affect both the statement of financial position and statement of comprehensive income.

A) I and II only
B) I, II and III
C) II and III only
D) None of the above.

Question 25

A Ltd holds a 60% interest in B Ltd. B Ltd sells inventory to A Ltd during the year for $10 000. The inventory originally cost $7000. At the end of the year 50% of the inventory is still on hand. The tax rate is 30%. The NCI adjustment required in relation to this transaction is a debit of:

A) NIL
B) $420
C) $630
D) $1050.

Question 26

A Ltd holds a 60% interest in B Ltd. On 1 July 2014 B Ltd transferred a depreciable non-current asset to A Ltd at a profit of $5000. The remaining useful life of the asset at the date of transfer was 4 years and the tax rate is 30%. The impact of the above on the NCI share of profit for the year ended 30 June 2015 is:

A) an increase of $2625
B) a decrease of $2625
C) an increase of $1050
D) a decrease of $1050.

Question 27

A non-controlling interest in the net assets of a subsidiary consists of the amount of those non-controlling interests at the date of the business combination:

A) less 100% of any post-acquisition dividends paid
B) less the parent's share of any post-acquisition dividends paid or declared
C) plus a share of the changes in equity since the business combination
D) less the non-controlling proportionate share of changes since the combination.

Question 28

In respect to the intragroup transfer of services, any profit or loss is regarded as:

A) insignificant and so not adjusted on consolidation
B) extraordinary and so ignored for consolidation reporting purposes
C) immediately realised
D) unrealised.

Question 29

If a gain on bargain purchase arises on a business combination, the non-controlling interest:

A) is allocated 100% of the gain
B) has no involvement with the gain
C) is entitled to a proportionate share of the gain based on its level of share ownership
D) receives a proportionate share of the gain after adjustments for tax effects have been made.

Question 30

A non-controlling interest in a subsidiary entity is entitled to a share of the following items:
$\begin{array} { l l l l l } & \text { I } & \text { II } & \text { III } & \text { IV } \\\text { Subsidiary equity at acquisition date } & \text { Yes } & \text { Yes } & \text { Yes } & \text { Yes } \\\text { Changes in equity since acquisition date } & \text { Yes } & \text { No } & \text { No } & \text { Yes } \\\text { Changes in equity of the current period } & \text { No } & \text { Yes } & \text { No } & \text { Yes }\end{array}$

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