Deck 19: Consolidation: Other Issues

Question 1

Which of the following cannot result in a loss of control by a parent over a subsidiary?

A)the parent sells some of the shares in the subsidiary;
B)there is a change in the dispersion in the holding of shares by entities comprising the NCI;
C)a receiver is appointed to manage the affairs of the parent;
D)the subsidiary becomes subject to the control of an administrator.

Answer 1

C

Question 2

Parent Limited has an 80% ownership interest in Subsidiary One Limited.Subsidiary One Limited has a 65% ownership interest in Subsidiary Two Limited.As a result of these ownership interests,there is a direct ownership interest in Subsidiary Two Limited amounting to:

A)52%;
B)48%;
C)35%;
D)13%.

Answer 2

C

Question 3

The pre-acquisition entry for the Hayward group in order to consolidate a 60% interest in a subsidiary contained the following debits.Retained earnings $3 000,Share capital $6 000,General Reserve $1 200,BCVR $600.The interest in equity attributable to the direct non-controlling interest is:

A)$6 800;
B)$7 200;
C)$10 800;
D)$18 000.

Answer 3

B

Question 4

Where a change in ownership interest results in the loss of control of a subsidiary:

A)the gain or loss in the parent's records will equal the consolidated gain or loss;
B)the remaining investment will be accounted for in accordance with AASB 9 Financial Instruments;
C)the remaining investment will be accounted for in accordance with AASB 127 Separate Financial Statements;
D)the gain or loss will be recorded in other comprehensive income.

Question 5

The direct non-controlling interest (DNCI)and indirect non-controlling interest (INCI)are:

Question 6

Mutual shareholdings exist when:

A)a parent owns shares in a subsidiary;
B)a subsidiary owns shares in a parent only;
C)a parent owns shares in a subsidiary and in a joint venture;
D)a parent and a subsidiary own shares in each other.

Question 7

The indirect non-controlling interest,in a group that has a multiple subsidiary structure,is entitled to:

A)a proportionate share of post-acquisition equity only;
B)a proportionate share of pre-acquisition equity only;
C)no share of post acquisition equity;
D)no share of either pre acquisition or post acquisition equity.

Question 8

The NCI share of profit in Bottle Brush for the year ended 30 June 20X6 is:

A)$11,600
B)$13,000
C)$13,800
D)$29,800

Question 9

The direct non-controlling interest,in a group that has a multiple subsidiary structure,is entitled to:

A)a proportionate share of post-acquisition equity only;
B)a proportionate share of pre-acquisition equity only;
C)a proportionate share of both pre-acquisition and post-acquisition equity.
D)no share of post-acquisition equity;

Question 10

Consider the following economic entity structure:


80%


70%

The direct non-controlling interest (DNCI)and indirect non-controlling interest (INCI)are:

Question 11

In a situation where a parent acquires shares in a subsidiary,and the subsidiary later acquires a controlling interest in another entity,the ownership structure is:

A)sequential;
B)non-sequential;
C)ordered;
D)random.

Question 12

The NCI share of profit in Honeydew for the year ended 30 June 20X7 is:

A)$9,800
B)$10,500
C)$20,300
D)$22,330

Question 13

In order to consolidate a 70% interest in a subsidiary,the Fitzpatrick group prepared the following pre-acquisition entry:
DR Retained earnings $2 000
DR Share capital $15 000
DR General reserve $3 000
DR Goodwill $1 000
CR Investment in subsidiary $21 000
The interest in equity attributable to the direct non-controlling interest (to the nearest dollar)is:

A)$8 571;
B)$9 000;
C)$20 000;
D)$21 000.

Question 14

An ownership structure in which Orange Limited acquires shares in Pear Limited before Pear Limited acquires shares in Quince Limited is known as:

A)an aggregate acquisition;
B)a sequential acquisition;
C)a multiple acquisition;
D)a compounding acquisition.

Question 15

A Limited has a 60% ownership interest in B Limited.B Limited has a 70% ownership interest in C Limited.As a result of these ownership interests,there is an indirect ownership interest in C Limited of:

A)60%;
B)42%;
C)40%;
D)18%.

Question 16

When calculating the direct non-controlling interest share of equity,consolidation adjustments are needed to:
A remove unrealised profits or losses from intragroup transactions;
B recognise profits made on intragroup services;
C eliminate intragroup advances;
D partially eliminate profits on intragroup services.

Question 17

Klang Limited has a direct ownership interest of 90% in Liao Limited.Liao Limited has a direct ownership interest of 70% in Meng Limited.The indirect non-controlling interest in Meng Limited is:

A)70%;
B)63%;
C)30%;
D)7%.

Question 18

The INCI in B Ltd is the same group of shareholders as the:

A)DNCI in B Ltd;
B)INCI in A Ltd;
C)DNCI in A Ltd;
D)shareholders in P Ltd.

Question 19

Gamma Limited acquired shares in Delta Limited.At the time of this acquisition Delta Limited already held shares in Epsilon Limited.This form of acquisition of an indirect ownership interest,by Gamma Limited in Epsilon Limited,is known as:

A)an indirect business combination;
B)an indirect acquisition;
C)a non-sequential acquisition;
D)an unorthodox acquisition.

Question 20

The effect of the interest paid by Bottle Brush to Waratah on the NCI of Bottle Brush for the year ended 30 June 20X7 is:

A)NIL
B)increase in MI of $1,120
C)increase in MI of $1,600
D)increase in MI of $2,800

Question 21

Explain how the indirect non-controlling interest is calculated in relation to dividends.

Question 22

Outline the difference between a direct non-controlling interest and an indirect non-controlling interest.

Question 23

Explain how the indirect non-controlling interest share of a subsidiary is calculated.

Question 24

How does an indirect non-controlling interest arise?

Question 25

Explain the term reciprocal interest.