Question 1

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. B

Question 2

A Ltd holds a 60% interest in B Ltd. B Ltd sells inventory to A Ltd during the year for $10 000. The inventories originally cost $7 000 when purchased from an external party. At the end of the year all inventories are still on hand. The tax rate is 30%. The NCI adjustment to this intragroup transaction is a debit to NCI of:

Accepted Answer

A)   Nil.
B)   $840.
C)   $2 100.
D)   $3 000. B

Question 3

Changes in equity in the current period that must be identified for the step 3 NCI entry include:

Accepted Answer

A)   profit/(loss)  earned, adjusted for the impact of BCVR entries on the current profit.
B)   transfers to/from reserves.
C)   dividends paid/declared.
D)   all the options are correct. D

Question 4

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 NCI adjustment entries in the consolidation worksheet for the dividend include:

Accepted Answer

A)   Dr Dividend revenue $2 000.
B)   Cr Dividend revenue $2 000.
C)   Dr Dividend payable $2 000.
D)   Dr NCI $2 000.

Question 5

Xin Limited paid $12 000 for 75% of the shares in Yan Limited. At the date of acquisition Yan Limited had equity as follows:
Share capital $10 000
Retained earnings $5 000
Other reserves $3 000
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)   $9 750.
B)   $12 000.
C)   $13 500.
D)   $18 000.

Question 6

Non-controlling interest is entitled to as:

Accepted Answer

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

Question 7

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 8

A non-controlling interest in a subsidiary entity is entitled to a share of the following items:

Accepted Answer

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

Question 9

Jiminez Limited acquired 80% of the shares in Mustang Limited for $150 000. At acquisition date, share capital in Mustang was $150 000 and reserves amounted to $50 000. All assets and liabilities of Mustang 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)   Nil.
B)   $10 000.
C)   $40 000.
D)   $50 000.

Question 10

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 11

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

Accepted Answer

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

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 13

A Ltd holds a 60% interest in B Ltd. On 1 July 2017 B Ltd transferred a depreciable non-current asset to A Ltd at a profit of $5 000. 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 transaction on the NCI share of profit for the year ended 30 June 2018 is:

Accepted Answer

A)   an increase of $2 625.
B)   a decrease of $2 625.
C)   an increase of $1 050.
D)   a decrease of $1 050.

Question 14

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

Accepted Answer

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

Question 15

During the previous 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)   Cr NCI.
B)   Dr Retained earnings.
C)   Cr General reserve.
D)   Cr Transfer to general reserve.

Question 16

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 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

Disclosure of NCI's share of consolidated equity is required in the following financial statements:

Accepted Answer

A)   consolidated statement of financial position.
B)   consolidated statement of comprehensive income.
C)   consolidated statement of changes in equity.
D)   all the options are correct.

Question 19

Jiminez Limited acquired 80% of the shares in Mustang Limited for $180 000. At acquisition date, share capital in Mustang was $100 000 and reserves amounted to $50 000. All assets and liabilities of Mustang were recorded at fair value at acquisition date 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:

Accepted Answer

A)   $30 000.
B)   $31 400.
C)   $32 000.
D)   $54 400.

Question 20

Which of the following is not a reason for an entity's preference to have less than 100% ownership interest in some subsidiaries:

Accepted Answer

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

Exam 29: Consolidation: Non-Controlling Interest