Deck 18: Consolidation: Non-Controlling Interest

Question 1

When preparing a consolidated statement of changes in equity,AASB 10 Consolidated Financial Statements,requires that any non-controlling interest in equity of subsidiaries is:

A)shown as a one-line item
B)disclosed in the statement of financial position,and not in the statement of changes in equity
C)shown as a share of total ending equity of the subsidiary only
D)shown on a line-by-line basis.

Answer 1

D

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 inventory originally cost $7 000.At the end of the year 50% of the inventory is still on hand.The tax rate is 30%.The NCI adjustment required in relation to this transaction is a debit of:

A)NIL
B)$420
C)$630
D)$1 050.

Answer 2

B

Question 3

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

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

Answer 3

C

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 adjustment entries in the consolidation worksheet for the dividend include:

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 5

A Ltd holds a 60% interest in B Ltd.A Ltd sells inventory to B Ltd during the year for $10 000.The inventory originally cost $7 000.At the end of the year 50% of the inventory is still on hand.The tax rate is 30%.The NCI adjustment required in relation to this transaction is a debit of:

A)NIL
B)$420
C)$630
D)$1 050.

Question 6

A Ltd holds a 60% interest in B Ltd.On 1 July 20X8 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 on the NCI share of profit for the year ended 30 June 20X9 is:

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 7

When preparing consolidated financial statements,any profit or loss that arises in relation to the intragroup transfer of services is regarded as:

A)immaterial and does not get adjusted on a consolidation worksheet
B)immediately realised
C)unrealised
D)having no impact on the non-controlling interest,and so ignored for consolidation reporting.

Question 8

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:

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

Question 9

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:

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

Question 10

According to AASB 10 Consolidated Financial Statements,the term 'non-controlling interest' means:

A)the total equity of the combined group
B)the equity in the parent entity other than the portion owned by the subsidiary entity
C)the equity in the economic entity other than that which can be attributed to the subsidiary entity
D)equity in a subsidiary not attributable,directly or indirectly,to a parent.

Question 11

Lu Nan Limited acquired 80% of the share capital and reserves of Hui Limited for $20 000.Share capital was $10 000 and reserves amounted to $6 000.All assets and liabilities were recorded at fair value except plant which was recorded at $1 000 below fair value.The company tax rate was 30%.The partial goodwill method is adopted by the group.The amount of goodwill acquired by Lu Nan Limited in this business combination was:

A)$4 000
B)$6 640
C)$7 200
D)$13 360.

Question 12

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

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 13

When preparing and presenting a consolidated statement of comprehensive income the non-controlling interest is:

A)presented as a separate component of revenue
B)shown as a separate component of profit before tax and a separate component of tax expense
C)shown as a separate component of each line item
D)presented as a separate portion of profit or loss attributable to the non-controlling interest.

Question 14

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?

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

Question 15

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

A)unowned interests
B)non-controlling interests
C)proprietary interests
D)pro rata ownership rights.

Question 16

In a consolidated statement of financial position,the non-controlling interest is shown:

A)separately within the non-current liabilities
B)separately within the non-current investments
C)separately within the equity section
D)as part of the total current liabilities of the group.

Question 17

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 $5 000
-Other reserves of $3 000
All of Y Limited's assets and liabilities were recorded at fair value.The fair value of identifiable net assets acquired by X Limited amounted to:

A)$9 750
B)$12 000
C)$13 500
D)$18 000.

Question 18

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:

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

Question 19

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:

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

Question 20

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

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 21

Outline the non-controlling interest's perspective of intragroup transfers for services.

Question 22

What is a non-controlling interest in relation to a group of entities?

Question 23

What is a gain on bargain purchase,how does it arise,and what is the non-controlling interest's involvement?

Question 24

Explain how the existence of a non-controlling interest affects the valuation entries at acquisition date.

Question 25

Explain why a non-controlling interest is entitled to a share of consolidated profit.