Deck 26: Consolidation: Non-Controlling Interest

Question 1

Xin Limited paid $12 000 for 75% of Yan Limited. At the date of acquisition Yan Limited had equity as follows:
$\blacktriangleright$ Share capital of $10 000
$\blacktriangleright$ Retained earnings of $5000
$\blacktriangleright$ 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:

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

Answer 1

$13 500

Question 2

Non-controlling interest is classified, according to IFRS 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.

Answer 2

B

Question 3

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

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.

Answer 3

B

Question 4

A non-controlling interest is entitled to a share of which of the following items?
I Equity of the parent 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.

Question 5

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 partial 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 6

When preparing a consolidated statement of changes in equity, IFRS 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.

Question 7

According to IFRS 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 8

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 9

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.

Question 10

Company A Limited owns 70% of the share capital of Company B Limited. Company B Limited paid a dividend of $10 000 during the financial period. The adjustment entries in the consolidation worksheet for the dividend include:

A) DR Dividend revenue $7 000;
B) DR Dividend revenue $10 000;
C) DR Dividend payable $7 000;
D) DR Dividend payable $10 000.

Question 11

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 closing retained earnings of Petros Limited at reporting date is:

A) $20 000
B) $24 000
C) $32 000
D) $36 000

Question 12

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 13

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. If the company tax rate was 30%, and the full goodwill method was adopted, the NCI share of equity at the date of acquisition was:

A) $30 000
B) $31 400
C) $35 000
D) $43 000.

Question 14

P Ltd paid $169 600 for 80% of the shares of S Ltd on 1 July 2013. All identifiable assets and liabilities of the subsidiary were recorded at fair value, except for land for which the fair value was $10 000 greater than cost. The tax rate is 30%. The NCI in S Ltd was considered to have a fair value of $42 000 and the group applies the full goodwill method. At acquisition date, the equity of S Ltd consisted of:
Share capital $100 000
General reserve $60 000
Retained earnings $40 000
The control premium paid by P Ltd is:

A) $600
B) $1600
C) $3000
D) $4600

Question 15

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 16

A Ltd holds a 60% interest in B Ltd. On 1 January 2014 B Ltd paid an interim dividend of $25 000 and on 30 June 2014 B Ltd declared a final dividend of $15 000.
The NCI journals at 30 June 2014 will include which of the following?

A) DR Interim dividend paid $10 000
B) DR NCI $16 000
C) CR Dividend receivable $6 000
D) CR Final dividend declared $9 000

Question 17

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 $6000. All assets and liabilities were recorded at fair value except plant which was recorded at $1000 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) $4000
B) $6640
C) $7200
D) $13 360.

Question 18

For a transaction to require an adjustment to the calculation of a non-controlling interest share of equity it must have the following characteristics:
I) The transaction must result in the subsidiary recording a profit or a loss.
II) After the transaction the other party to the transaction 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.

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

Question 19

A non-controlling interest is a contributor of:

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

Question 20

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. 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) $35 000
D) $43 000.

Question 21

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

A) insignificant and so not adjusted when performing NCI calculations;
B) extraordinary and so ignored for consolidation reporting purposes;
C) immediately realised;
D) unrealised.

Question 22

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 $7000. 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) $1050.

Question 23

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 24

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:

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

Question 25

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 $7000. 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) $1050.