Question 1

Disclosure of the non-controlling interest's share of consolidated equity is required in which of the following financial statements?

Accepted Answer

A)   all of these financial statements.
B)   consolidated statement of changes in equity.
C)   consolidated statement of financial position.
D)   consolidated statement of comprehensive income. A

Question 2

Marion Limited paid $180 000 for 60% of the shares in Lucia Limited. At the date of acquisition Lucia Limited had share capital of $160 000 and retained earnings of $90 000 and all of Lucia Limited's assets and liabilities were recorded at fair value, except for plant that had a fair value of $40 000 more than its carrying amount. The company tax rate was 30%. The fair value of identifiable net assets acquired by Marion Limited amounted to:

Accepted Answer

A)   $166 800
B)   $174 000
C)   $178 000
D)   $180 000 A

Question 3

Which of the following statements is correct?

Accepted Answer

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

Question 4

Non-controlling interest is entitled to a part of the equity of the:

Accepted Answer

A)   parent entity.
B)   subsidiary entity.
C)   parent entity as reflected in the consolidated equity.
D)   subsidiary entity as reflected in the consolidated equity.

Question 5

The intragroup transactions considered for NCI are normally those involving:

Accepted Answer

A)   the NCI selling inventories items or non-current assets to the parent for a profit or loss.
B)   the parent selling inventories items or non-current assets to the subsidiary for a profit or loss.
C)   the subsidiary selling inventories items or non-current assets to the parent for a profit or loss.
D)   all of these options are correct.

Question 6

On a consolidation worksheet, the non-controlling interest columns are used to:

Accepted Answer

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

Question 7

In respect to the intragroup services provided by a partly-owned subsidiary to the parent, the NCI adjustment required is a debit to NCI of:

Accepted Answer

A)   Nil.
B)   the service fees.
C)   the service fees multiplied by the NCI ownership interest.
D)   the service fees multiplied by the parent's ownership interest.

Question 8

Kenny Ltd holds a 60% interest in Swan Ltd. Kenny Ltd sells inventory to Swan Ltd during the year for $40 000. The inventories originally cost Kenny Ltd $32 000 when purchased from an external party. At the end of the year 50% of the inventories are still on hand. The tax rate is 30%. The NCI adjustment required in relation to this intragroup transaction is a debit to NCI of:

Accepted Answer

A)   Nil.
B)   $1 120
C)   $2 240
D)   $2 800

Question 9

The step 1 NCI entry to reflect the NCI share of equity at acquisition date:

Accepted Answer

A)   changes every period as a result of changes in NCI.
B)   never changes, and is the same in all subsequent consolidation worksheets.
C)   changes every period as a result of changes in the subsidiary's pre-acquisition equity.
D)   changes every period as a result of changes in the subsidiary's post-acquisition equity.

Question 10

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

Accepted Answer

A)   private interests.
B)   unowned interests.
C)   proprietary interests.
D)   non-controlling interests.

Question 11

Ryan Ltd holds a 75% interest in Tully Ltd. On 1 July 2021, Tully Ltd transferred a depreciable non-current asset to Ryan Ltd at a profit of $15 000. The remaining useful life of the asset at the date of transfer was 5 years and the tax rate is 30%. The impact of the above transaction on the NCI for the year ended 30 June 2023 is:

Accepted Answer

A)   an increase of $1 050.
B)   a decrease of $1 050.
C)   an increase of $1 500.
D)   a decrease of $1 500.

Question 12

Which of the following is not a reason for an entity to prefer to have less than 100% ownership interest in a subsidiary?

Accepted Answer

A)   To comply with regulatory requirements.
B)   To receive the whole gain on acquisition.
C)   To decrease the cash necessary to acquire the control over the subsidiaries.
D)   To incentivise the subsidiary's executives by allowing them to hold a non-controlling interest.

Question 13

Which of the following statements is incorrect with regards to a consolidation worksheet in the presence of the non-controlling interest?

Accepted Answer

A)   there is no NCI share extracted from the assets and liabilities section of the worksheet.
B)   one extra column is added that includes the parent share of the individual equity accounts.
C)   two extra columns are added to the worksheet to divide the consolidated equity into the NCI and parent share.
D)   one extra column is added that includes the NCI share of the individual equity accounts.

Question 14

Angus Limited owns 80% of the share capital of Boris Limited. Boris Limited paid a dividend of $150 000 during the financial period. The adjustment entries in the consolidation worksheet for the dividend include:

Accepted Answer

A)   DR Dividend paid $150 000.
B)   DR Dividend revenue $120 000.
C)   DR Dividend payable $120 000.
D)   DR Dividend receivable $150 000.

Question 15

North Limited acquired 80% of the shares in South Limited for $100 000. At acquisition date, share capital in South was $90 000 and reserves amounted to $50 000. All assets and liabilities of South were recorded at fair value at acquisition date. The partial goodwill method is adopted by the group. If the company tax rate was 30%, the NCI will recognise a gain on bargain purchase of:

Accepted Answer

A)   $12 000
B)   $8 000
C)   $2 400
D)   Nil.

Question 16

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's transfer?

Accepted Answer

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

Question 17

Maddie Ltd holds 80% interest in Emily Ltd. Emily Ltd sells inventory to Maddie Ltd during the year for $15 000. The inventories originally cost $13 000 when purchased from an external party. At the end of the year 50% of the inventories are still on hand. The tax rate is 30%. The NCI adjustment required in relation to this transaction is a debit to NCI of:

Accepted Answer

A)   $140
B)   $700
C)   $1000
D)   Nil.

Question 18

The following information is required to be disclosed for the non-controlling interest (NCI) except for:

Accepted Answer

A)   the NCI share of consolidated equity.
B)   the NCI share of consolidated profit before tax.
C)   the NCI share of consolidated profit after tax.
D)   the NCI share of consolidated comprehensive income.

Question 19

James Limited is a subsidiary of Anastasia Limited. When Anastasia acquired its 75% interest in James, the retained earnings of James were $10 000. At the beginning of the current period James Limited's retained earnings were $40 000. James earned profit after tax of $20 000 during the current period. The total share of the non-controlling interest in the equity of James Limited at the end of the current period is:

Accepted Answer

A)   $7 500
B)   $10 000
C)   $15 000
D)   $17 500

Question 20

The following statements are reasons as to why entities do not use the full goodwill method. Which of these statements is incorrect?

Accepted Answer

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

Exam 29: Consolidation: Non-Controlling Interest