Chapter 29 Key_ Where the parent entity holds less
15. Where
the parent entity holds less than 100 per cent interest in a subsidiary, AASB
10 requires the remaining shareholders’ interests in what items to be
disclosed?
A. the
subsidiary’s share capital and reserves
B. the
subsidiary’s profit or loss
C. the
subsidiary’s current and non-current assets
D. the
subsidiary’s share capital and reserves and the subsidiary’s profit or loss
Chapter – Chapter 29 #15
Difficulty: Easy
Section: 29.01 What is a non-controlling
interest?
16. Non-controlling
interests arise when:
A. The
parent entity does not control a subsidiary in the group.
B. The
parent entity raises capital through preference shares that have the
characteristics of debt to fund the subsidiary.
C. The
subsidiary has owners of equity who are not owners through their ownership
interest in the controlling parent entity.
D. The
subsidiary has invested in other entities in which it does not have a
controlling interest.
Chapter – Chapter 29 #16
Difficulty: Easy
Section: 29.01 What is a non-controlling
interest?
17. Buster
Ltd owns 85 per cent of the issued capital of Rhymes Ltd. During the period
ended 30 June 2016 the operating profit of Rhymes Ltd was $680 000. Buster Ltd
bought goods for $540 000 from Rhymes. The goods cost Rhymes $400 000 and at
the end of the period none of this inventory was still on hand. Rhymes paid
Buster a management fee of $100 000 during the period. Goodwill on
consolidation was impaired by $30 000. Rhymes paid a dividend of $40 000 at the
end of the period.
What is the non-controlling interest in the
operating profit of Rhymes Ltd?
A. $87
000
B. $112
500
C. $102
000
D. $101
969
Chapter – Chapter 29 #17
Difficulty: Medium
Section: 29.02 Non-controlling interests to
be disclosed in the consolidated financial statements
18. On
1 July 2015 Harry Ltd purchased 80 per cent of the issued share capital of
Wills Ltd and has control of Wills. The fair value of the net assets of Wills
Ltd on that date was represented as follows:
Harry Ltd paid cash consideration of $2 500 000
for Wills. Wills Ltd made an operating profit of $350 000, there were no
intragroup transactions during the period ended 30 June 2016. Goodwill had been
determined to have been impaired during the year by $25 000. What consolidation
journal entries are required for the period and what is the non-controlling
interest in equity as at 30 June 2016?
A.
B.
C.
D.
Chapter – Chapter 29 #18
Difficulty: Medium
Section: 29.03 Calculating non-controlling
interests
19. Finger
Ltd purchased 75 per cent of the issued capital and in the process gained
control over Nail Ltd on 1 July 2013. The fair value of the net assets of Nail
Ltd at purchase was represented by:
Finger Ltd paid cash consideration of $4 000
000 for Nail Ltd. During the period ended 30 June 2015, Nail Ltd paid
management fees of $540 000 to Finger Ltd and Nails had an operating profit of
$980 000. Nails’ opening retained earnings at the beginning of the period were
$1 460 000. At the end of the period Nail Ltd declared a dividend of $90 000.
There were no other inter-company transactions. Goodwill was determined to have
been impaired by $19 000 during the period. Companies in the group accrue
dividends when they are declared by subsidiaries.
For
the period ended 30 June 2015, what consolidation journal entries are required
and what is the non-controlling interest?
A.
B.
C.
D.
Chapter – Chapter 29 #19
Difficulty: Hard
Section: 29.03 Calculating non-controlling
interests
20. When
a subsidiary company that has a non-controlling interest (NCI) declares a
dividend, the treatment in the consolidated statement of financial position of
dividends not paid is:
A. The
non-controlling interest portion of the dividend owing should be eliminated
along with the parent entity’s share, leaving a zero balance in dividends
payable.
B. The
NCI’s portion should be deducted from the non-controlling interest’s share in
equity. There should be no dividend amounts remaining in the consolidated
statement of financial position, but the amount owed to the NCI should be
disclosed separately.
C. The
amount owing to NCI as a dividend payable should be included in the
consolidated statement of financial position as a current liability.
D. The
amount of dividends payable to both the parent entity and the NCI will be
reflected in the consolidated statement of financial position.
Chapter – Chapter 29 #20
Difficulty: Easy
Section: 29.01 What is a non-controlling
interest?
21. Calculating
goodwill for a subsidiary that has a non-controlling interest involves:
A. Taking
the parent entity’s share of the fair value of the identifiable net assets of
the subsidiary and deducting it from the fair value of the consideration paid.
B. Dividing
the fair value of the consideration paid for the subsidiary by the percentage
ownership of the parent entity and deducting the fair value of the identifiable
net assets of the subsidiary from that amount.
C. Taking
the book value of equity of the subsidiary and deducting the fair value of the
consideration paid for the subsidiary.
D. Dividing
the fair value of the identifiable net assets of the subsidiary by the
percentage ownership of the parent entity and deducting this amount from the fair
value of the consideration paid.
Chapter – Chapter 29 #21
Difficulty: Easy
Section: 29.03 Calculating non-controlling
interests
22. Calculating
the non-controlling interest (NCI) in the operating profit and opening retained
earnings of a subsidiary is done by:
A. taking
the operating profit and opening retained earnings figures of the subsidiary
and multiplying them by the percentage ownership held by the NCI.
B. adjusting
the operating profit and opening retained earnings of the subsidiary for any
intragroup transactions and multiplying them by the percentage ownership held
by the NCI.
C. adjusting
the operating profit of the subsidiary for any unrealised profit or expense of
the subsidiary as a result of any intragroup transactions and multiplying both
this and the opening retained earnings by the percentage ownership held by the
NCI.
D. adjusting
the opening retained earnings and the operating profit for any unrealised
profit or expense of the subsidiary as a result of intragroup transactions and
multiplying this by the percentage ownership held by the NCI.
Chapter – Chapter 29 #22
Difficulty: Medium
Section: 29.03 Calculating non-controlling
interests
23. Groucho
Ltd purchased 60 per cent of the issued capital and in the process gained
control over Marx Ltd on 1 July 2014. The fair value of the net assets of Marx
Ltd at purchase was represented by:
Groucho Ltd paid cash consideration of $1 850
000 for Marx Ltd. During the period ended 30 June 2015, Marx Ltd paid
management fees of $200 000 to Groucho Ltd and Marx had an operating profit of
$530 000. Marx Ltd paid a dividend of $100 000 during the period. Groucho
purchased inventory from Marx during the period for $80 000. The inventory cost
Marx Ltd $56 000 and at the end of the period Groucho had 50 per cent of that
inventory still on hand. Goodwill has been determined to have been impaired by
$6200 during the period. Companies in the group use perpetual inventory systems
and accrue dividends when they are declared by subsidiaries. Ignore tax
implications.
For
the period ended 30 June 2015, what consolidation journal entries are required
and what is the non-controlling interest?
A.
B.
C.
D.
Chapter – Chapter 29 #23
Difficulty: Hard
Section: 29.03 Calculating non-controlling
interests
24. Green
Ltd purchased 90 per cent of the issued capital and in the process gained
control over Maroon Ltd on 1 July 2015. The fair value of the net assets of
Maroon Ltd at purchase was represented by:
Green Ltd paid cash consideration of $3 700
000 for Maroon Ltd. During the period ended 30 June 2017, Maroon Ltd paid
management fees of $100 000 to Green Ltd and Maroon had an operating profit of
$405 000. Maroon Ltd declared a dividend of $98 000 during the period. Green
purchased inventory from Maroon during the period ended 30 June 2017 for $100
000. The inventory cost Maroon Ltd $85 000 and at the end of the period Green
had 35 per cent of that inventory still on hand. Maroon’s opening retained
earnings for the period ended 30 June 2017 was $810 000. Goodwill has been
determined to have been impaired by $13 600. Companies in the group use
perpetual inventory systems and accrue dividends when they are declared by
subsidiaries. There were no other inter-company transactions. Ignore tax
implications.
For
the period ended 30 June 2017, what consolidation journal entries are required
and what is the outside equity interest?
A.
B.
C.
D.
Chapter – Chapter 29 #24
Difficulty: Hard
Section: 29.03 Calculating non-controlling
interests
25. Which
of the following is not one of the stages used to determine non-controlling
interest?
A. the
non-controlling interest in the current period’s profit or loss
B. the
non-controlling interest in share capital at the date of acquisition of the
subsidiary by the parent entity
C. the
non-controlling interest in the goodwill at acquisition
D. the
non-controlling interest in reserves at the date of acquisition of the
subsidiary by the parent entity
Chapter – Chapter 29 #25
Difficulty: Easy
Section: 29.01 What is a non-controlling
interest?
26. The
disclosure of non-controlling interests in the (a) comprehensive income
statement; and (b) statement of financial position is as follows:
A. (a)
profit or loss attributable to non-controlling interest in the notes; (b)
non-controlling interest in equity as a separate line item
B. (a)
profit or loss attributable to non-controlling interest on the face; (b) non-controlling
interest in equity as part of share capital
C. (a)
profit or loss attributable to non-controlling interest in the notes; (b)
non-controlling interest in equity as part of share capital
D. (a)
profit or loss attributable to non-controlling interest on the face; (b)
non-controlling interest in equity as a separate line item
Chapter – Chapter 29 #26
Difficulty: Medium
Section: 29.02 Non-controlling interests to
be disclosed in the consolidated financial statements
27. After
eliminating the dividend payable to the parent, the balance of the dividend
payable to the non-controlling interest will be:
A. eliminated
as well.
B. included
within the consolidated financial statements.
C. recognised
as an expense in the consolidated financial statements.
D. transferred
into a non-controlling interest reserve account.
Chapter – Chapter 29 #27
Difficulty: Easy
Section: 29.03 Calculating non-controlling
interests
28. There
is no adjustment for things such as management fees when determining
non-controlling interest, because:
A. They
are not a material item.
B. They
do not involve non-controlling interest.
C. They
are considered to be realised.
D. They
relate only to the parent entity.
Chapter – Chapter 29 #28
Difficulty: Medium
Section: 29.03 Calculating non-controlling
interests
29. Which
of the following situations, involving eliminations as part of the
consolidation process, would not have implications for the calculation of non-controlling
interest?
A. the
sale of a non-current asset by the subsidiary to the parent
B. the
payment of a management fee by the subsidiary to the parent
C. the
sale of inventory by the parent to the subsidiary
D. the
payment of a management fee by the subsidiary to the parent and the sale of
inventory by the parent to the subsidiary
Chapter – Chapter 29 #29
Difficulty: Medium
Section: 29.03 Calculating non-controlling
interests
