Question 1

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:

Accepted Answer

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

Question 2

A non-controlling interest is a contributor of:

Accepted Answer

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

Question 3

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.

Accepted Answer

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

Question 4

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.

Accepted Answer

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 5

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:

Accepted Answer

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 6

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:

Accepted Answer

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

Question 7

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:

Accepted Answer

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

Question 8

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.

Accepted Answer

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

Question 9

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

Accepted Answer

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 10

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.

Accepted Answer

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 11

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

Accepted Answer

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 12

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.

Accepted Answer

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

Question 13

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:

Accepted Answer

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

Question 14

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

Accepted Answer

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

Question 15

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

Accepted Answer

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.

Question 16

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

Accepted Answer

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

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?

Accepted Answer

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

Question 18

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

Accepted Answer

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.

Question 19

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:

Accepted Answer

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

Question 20

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

Accepted Answer

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

Exam 27: Consolidation: Non Controlling Interest