Question 1

Minority interests are shown as equity: that is, as contributors of equity capital to the economic entity:

Accepted Answer

Minority interests are shown as equity because they represent the portion of the subsidiary that is owned by outside shareholders. As such, they contribute to the equity of the company overall.

Question 2

When a subsidiary company that has a minority interest (MI) declares a dividend, the treatment in the consolidated balance sheet of dividends not paid is:

Accepted Answer

C

Question 3

Minority interests are 'identified' and eliminated as part of the consolidation process:

Accepted Answer

False

Question 4

AASB 101 "Presentation of Financial Statements" requires a separate line item on the face of the statement of financial position showing the non-controlling interest in equity.

Accepted Answer

AASB 101 does require a separate line item on the face of the statement of financial position showing the non-controlling interest in equity.

Question 5

Minority interests arise when:

Accepted Answer

Minority interests arise when the subsidiary has owners of equity who are not owners through their ownership interest in the controlling parent entity. In other words, minority interests are ownership interests in a subsidiary held by parties other than the parent company. The other options do not provide the definition or explanation of minority interests.

Question 6

On 1 July 2005 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 2006. 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 minority interest in equity as at 30 June 2006?

Accepted Answer

The answer of On 1 July 2005 Harry Ltd purchased...

Question 7

AASB 101 "Presentation of Financial Statements" requires an entity to disclose separately in the statement of comprehensive income, profit or loss for the period attributable to non-controlling interest and owners of the parent.

Accepted Answer

AASB 101 requires separate disclosure of profit or loss attributable to non-controlling interest and owners of the parent in the statement of comprehensive income.

Question 8

Using full goodwill method, share of goodwill attributable to the non-controlling interests is recognized in the statement of financial position as part of non-controlling interest in equity.

Accepted Answer

Under the full goodwill method, the share of goodwill attributable to the non-controlling interests is recognized as part of non-controlling interest in equity.

Question 9

Minority interests are allocated on a 'line-by-line' basis throughout the income statement:

Accepted Answer

The answer of Minority interests are allocated on a 'line-by-line'...

Question 10

Where the parent entity holds less than 100 per cent interest in a subsidiary, AASB 127 requires the remaining shareholders' interests in what items to be disclosed?

Accepted Answer

AASB 127 requires disclosure of the subsidiary's share capital and reserves and profit or loss as these are directly related to the non-controlling interests. Disclosure of the subsidiary's assets is not specifically required, but may be useful in providing additional information to users of the financial statements. Option E is not the best choice because it includes options that are not required to be disclosed by AASB 127.

Question 11

AASB 127 "Consolidated and Separate Financial Statements" prescribes that non-controlling interests be presented in the consolidated statement of financial position as a liability.

Accepted Answer

The answer of AASB 127 "Consolidated and Separate Financial Statements"...

Question 12

Finger Ltd purchased 75 per cent of the issued capital and in the process gained control over Nail Ltd on 1 July 2003. 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 2005, 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 2005, what consolidation journal entries are required and what is the minority interest?

Accepted Answer

The answer of Finger Ltd purchased 75 per cent of...

Question 13

Buster Ltd owns 85 per cent of the issued capital of Rhymes Ltd. During the period ended 30 June 2006 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 minority interest in the operating profit of Rhymes Ltd?

Accepted Answer

To calculate the minority interest in the operating profit of Rhymes Ltd, we first need to calculate the profit attributable to the minority interest.

Operating profit of Rhymes Ltd = $680,000 
Profit attributable to the minority interest = 15% of $680,000 = $102,000

Therefore, the correct answer is option C) $102,000.

Question 14

Total comprehensive income is attributed to the owners of the parent and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

Accepted Answer

Total comprehensive income is attributed to both the owners of the parent and the non-controlling interests, regardless of whether the non-controlling interests end up in a deficit balance. This is in accordance with the accounting principle of treating non-controlling interests as equity rather than liabilities.

Question 15

Parties who are not part of the ownership of the parent entity in a group and who own capital in a company that is a controlled entity in that group are called outside financing interests:

Accepted Answer

Parties who are not part of the ownership of the parent entity in a group and who own capital in a company that is a controlled entity in that group are called minority interests or non-controlling interests, not outside financing interests.

Question 16

In preparing consolidated financial statements minority interests are allocated on a 'line-by-line' basis:

Accepted Answer

The answer of In preparing consolidated financial statements minority interests...

Question 17

In calculating the proportion of a subsidiary's profit that is attributable to owners who are not part of the group, all adjustments to the group's profit should be treated as affecting the calculation for the outside owners:

Accepted Answer

In calculating the proportion of a subsidiary's profit attributable to non-controlling interests (outside owners), only those adjustments that affect the subsidiary's profit should be considered, not all adjustments to the group's profit.

Question 18

One of the steps in preparing consolidated financial statements is working out the amounts to be attributed to non-controlling interests to determine the amount to be eliminated in the consolidation process.

Accepted Answer

The answer of One of the steps in preparing consolidated...

Question 19

Under the proprietary concept of consolidation, minority interests are shown as a liability:

Accepted Answer

Under the proprietary concept of consolidation, minority interests are considered a liability because they represent the portion of a subsidiary's net assets that are not owned by the parent company. Therefore, they are shown as a liability on the consolidated balance sheet.

Question 20

Calculating goodwill for a subsidiary that has a minority interest involves:

Accepted Answer

The answer of Calculating goodwill for a subsidiary that has...

Quiz 30: Further Consolidation Issues Ii: Accounting for Minority Interests