Question 1

No tax- effect adjustments are necessary in relation to the consolidation elimination of intragroup services because:

Accepted Answer

A) no temporary differences exist between the accounting and tax bases of any assets or liabilities arise due to these elimination entries 
B) no adjustment has been made to any expense or income accounts 
C) no adjustment has been made to any asset or liability accounts 
D) both A and C D

Question 2

If a non- current asset is sold between two entities in a group:

Accepted Answer

A) a consolidation adjustment is required to eliminate the effect of the intragroup transaction 
B) any gain or loss on sale must be eliminated from the consolidated accounts 
C) there has been either a gain or loss on the intragroup sale of the asset 
D) both A and B D

Question 3

Which of the following statements is incorrect?

Accepted Answer

A) adjustments for unrealised profit in opening inventory would also be required in the following accounting period if this inventory were not sold in the current period 
B) the opening inventory held by an entity at the start of one period becomes the closing inventory in the profit and loss summary for the next period 
C) the closing inventory held by an entity at the end of one period becomes the opening inventory in the profit and loss summary for the next period 
D) from an economic entity viewpoint,the opening inventory of the economic entity will be overstated if a consolidation adjustment is not made to eliminate the unrealised profit in opening inventory B

Question 4

When a final dividend is not legally payable until sanctioned by the annual general meeting:

Accepted Answer

A) approval of payment is not generally a formality given that the parent entity has control of the subsidiary 
B) a parent cannot recognise,as revenue,a dividend proposed by a subsidiary prior to its receipt 
C) approval of payment is generally a formality given that the parent entity has control of the subsidiary 
D) none of the above

Question 5

Explain intragroup services and identify why they need to be eliminated on consolidation.

Accepted Answer

The answer of Explain intragroup services and identify why they...

Question 6

Explain the need for depreciation consolidation adjustments relating to intragroup sales of depreciable assets.

Accepted Answer

The answer of Explain the need for depreciation consolidation adjustments...

Question 7

Intragroup borrowings must be eliminated because:

Accepted Answer

A) interest paid on these borrowings does not represent a transaction with external parties 
B) these amounts owing represent borrowings with parties external to the economic entity 
C) these amounts owing do not represent borrowings with parties external to the economic entity 
D) both A and C

Question 8

The journal entry by a subsidiary to record the declaration of a final dividend at the end of the financial year includes a:

Accepted Answer

A) Credit to Dividend receivable 
B) Credit to Dividend payable 
C) Debit to Final dividend proposed 
D) both B and C

Question 9

Provide examples of intragroup borrowings and discuss why it is necessary to make consolidation adjustments to eliminate them.

Accepted Answer

The answer of Provide examples of intragroup borrowings and discuss...

Question 10

A parent company sells some inventory to its subsidiary for $5000.The original cost of the inventory to the parent was $4000.The economic entity only makes a profit when:

Accepted Answer

A) the subsidiary resells the inventory back to the parent 
B) the subsidiary resells the inventory outside the group 
C) the parent sells the inventory to the subsidiary 
D) none of the above

Question 11

Discuss why it is necessary to make consolidation adjustments for intragroup sales of depreciable assets.

Accepted Answer

The answer of Discuss why it is necessary to make...

Question 12

When a parent company purchases shares in a subsidiary company for cash and the shares are cum div,the journal entry in the parent's accounts is:

Accepted Answer

A) Debit Shares in subsidiary Debit Dividend receivable Credit Cash 
B) Debit Shares in subsidiary Credit Cash Credit Dividend payable 
C) Debit Dividend payable Credit Cash 
D) Debit Cash Credit Dividend revenue

Question 13

Which of the following statements is incorrect?

Accepted Answer

A) AASB 127 specifies that intragroup balances,transactions,income and expenses shall be eliminated in full 
B) a new consolidation is carried out each year,with no adjustments being made in the separate legal accounts of the consolidated group members 
C) the purpose of consolidated accounts is to show the operating result and financial position of the economic entity in its dealings with entities outside the group 
D) only the parent company's share of the subsidiary needs to be eliminated in relation to intragroup transactions

Question 14

Transactions that have taken place between individual entities of an economic entity are known as:

Accepted Answer

A) intraequity transactions 
B) intergroup transactions 
C) intragroup transactions 
D) none of the above

Question 15

Which of the following statements regarding the tax effect of dividends is incorrect?

Accepted Answer

A) no tax- effect entry is required for entries eliminating dividend revenue on intragroup dividends 
B) no tax is normally payable on the dividends received given the operation of the tax rebate 
C) a parent entity which is a public company is entitled to a rebate of tax on dividends from a resident company subsidiary 
D) a tax- effect entry is required for entries eliminating dividend revenue on intragroup dividends

Question 16

Explain the need for consolidation adjustments in relation to intragroup sales of inventory.

Accepted Answer

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Question 17

Examples of intragroup transactions include:

Accepted Answer

A) rental of premises and equipment 
B) provision of specialist services to one entity by staff from another entity 
C) management fees 
D) all of the above

Question 18

For an interim dividend declared and paid during the current period by a subsidiary to its parent,the two accounts to be eliminated in the consolidation elimination entry are:

Accepted Answer

A) dividend revenue and dividend receivable 
B) dividend payable and interim dividend declared 
C) dividend revenue and interim dividend declared 
D) dividend payable and dividend receivable

Exam 13: Consolidation: Intragroup Transactions

No tax- effect adjustments are necessary in relation to the consolidation elimination of intragroup services because:

If a non- current asset is sold between two entities in a group:

Which of the following statements is incorrect?

When a final dividend is not legally payable until sanctioned by the annual general meeting:

Explain intragroup services and identify why they need to be eliminated on consolidation.

Explain the need for depreciation consolidation adjustments relating to intragroup sales of depreciable assets.

Intragroup borrowings must be eliminated because:

The journal entry by a subsidiary to record the declaration of a final dividend at the end of the financial year includes a:

Provide examples of intragroup borrowings and discuss why it is necessary to make consolidation adjustments to eliminate them.

A parent company sells some inventory to its subsidiary for $5000.The original cost of the inventory to the parent was $4000.The economic entity only makes a profit when:

Discuss why it is necessary to make consolidation adjustments for intragroup sales of depreciable assets.

When a parent company purchases shares in a subsidiary company for cash and the shares are cum div,the journal entry in the parent's accounts is:

Which of the following statements is incorrect?

Transactions that have taken place between individual entities of an economic entity are known as:

Which of the following statements regarding the tax effect of dividends is incorrect?

Explain the need for consolidation adjustments in relation to intragroup sales of inventory.

Examples of intragroup transactions include:

For an interim dividend declared and paid during the current period by a subsidiary to its parent,the two accounts to be eliminated in the consolidation elimination entry are: