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:

Accepted Answer

AASB 10 Consolidated Financial Statements requires that any non-controlling interest in equity of subsidiaries be shown on a line-by-line basis in the consolidated statement of changes in equity. This means that each component of the non-controlling interest, such as share capital, retained earnings, and other reserves, should be separately presented in the statement.

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:

Accepted Answer

The unrealized profit on the inventory is $1,500 (50% of $3,000 profit). The NCI's share of this unrealized profit is 40% (100% - 60% control), which is $600. After tax adjustment (30%), the NCI adjustment is $600 * (1 - 0.30) = $420.

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

Accepted Answer

A non-controlling interest is entitled to a share of the subsidiary entity's equity, which includes the equity at acquisition date (IV) and any changes in equity since then (III). Additionally, the non-controlling interest is entitled to a share of the current period's profit or loss of the subsidiary entity (II) as it reflects the performance of the subsidiary since acquisition. Therefore, options A, B, and D are incorrect as they either exclude the share of changes in equity or do not include the current period profit or loss.

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:

Accepted Answer

When consolidating financial statements, dividends received by a subsidiary from its parent company (or vice versa) are eliminated as intercompany transactions. In this case, since Company A owns 90% of Company B's shares, the elimination entry for the dividend received by Company B would be to credit the Dividend revenue account for $18,000 (90% of $20,000). Therefore, the correct adjustment entry would be to debit Dividend revenue for $18,000.

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:

Accepted Answer

The answer of A Ltd holds a 60% interest in...

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:

Accepted Answer

The transfer of the depreciable non-current asset at a profit of $5,000 will result in a tax liability of $1,500 (30% of $5,000). As A Ltd holds a 60% interest in B Ltd, it will receive 60% of the profit, resulting in an increase in its profit of $3,000 (60% of $5,000). However, the NCI share of profit will reduce by $1,050 (70% of $1,500), resulting in a decrease in overall profit for NCI. Therefore, the correct answer is (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:

Accepted Answer

The answer of When preparing consolidated financial statements,any profit or...

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:

Accepted Answer

The non-controlling interest (NCI) holds 40% of Petros Limited. At the beginning of the period, Petros had retained earnings of $50,000. During the period, Petros earned an additional $10,000, making total retained earnings $60,000 at the reporting date. The NCI's share is 40% of $60,000, which is $24,000.

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:

Accepted Answer

The answer of Jiminez Limited acquired 80% of the share...

Question 10

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

Accepted Answer

Non-controlling interest refers to the equity in a subsidiary that is 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:

Accepted Answer

First, we need to calculate the acquisition price (considering the partial goodwill method):
Acquisition Price = (80% x $10 000) + (80% x $6 000) - (80% x $1 000) = $8 000 + $4 800 - $800 = $11 000
Then we need to calculate the net assets acquired:
Net Assets = (100% x $10 000) + (100% x $6 000) - (100% x $1 000) = $15 000
Now we can calculate the amount of goodwill acquired by subtracting the net assets from the acquisition price:
Goodwill = Acquisition Price - Net Assets = $11 000 - $15 000 = -$4 000
Since the goodwill is negative, we need to reverse the signs and take the absolute value:
Goodwill = $4 000
Therefore, the answer is B, $6 640.

Question 12

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

Accepted Answer

In a business combination, a gain on bargain purchase is recognized by the acquirer and not allocated to the non-controlling interest. The gain arises when the fair value of net assets acquired exceeds the purchase consideration, and it is recognized in the acquirer's financial statements.

Question 13

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

Accepted Answer

The non-controlling interest is presented as a separate portion of profit or loss attributable to the non-controlling interest in the consolidated statement of comprehensive income. This is to distinguish the portion of profit or loss that belongs to the parent company and the portion that belongs 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?

Accepted Answer

The answer of During the current year a partly owned...

Question 15

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

Accepted Answer

Non-controlling interests refer to ownership interests in a subsidiary entity that do not belong to the parent entity. These are also known as minority interests or equity interests. The parent entity holds controlling interest in the subsidiary, while the non-controlling interest holders have limited or no control over the subsidiary's operations.

Question 16

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

Accepted Answer

Non-controlling interest represents the portion of equity in a subsidiary not attributable to the parent company, hence it should be shown separately within the equity section of a consolidated statement of financial position.

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:

Accepted Answer

The identifiable net assets acquired by X Limited include 75% of the equity of Yan Limited. Therefore, the share capital and retained earnings need to be multiplied by 75%. Additionally, the fair value of other reserves needs to be added. This calculation is as follows: 
$10,000 x 0.75 + $5,000 x 0.75 + $3,000 = $7,500 + $3,750 + $3,000 = $13,500. Therefore, option C is the correct answer.

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:

Accepted Answer

To find the fair value of identifiable net assets acquired by Xana Limited, we need to first calculate the net assets of Yama Limited at the date of acquisition. The net assets of Yama Limited can be calculated as follows:

Net Assets = Share Capital + Retained Earnings
Net Assets = $100,000 + $50,000
Net Assets = $150,000

Since Xana Limited acquired 60% of Yama Limited, they only acquired 60% of the net assets, which is:

Fair Value of Identifiable Net Assets = 60% x $150,000
Fair Value of Identifiable Net Assets = $90,000

Therefore, the correct choice is B.

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:

Accepted Answer

To calculate the NCI share of equity, we need to first calculate the total assets and liabilities after the acquisition.

Total assets = $100,000 + ($50,000 - $10,000) x 1.8 = $122,000

Total liabilities = $0

Total equity = $122,000

NCI share of equity = (1 - 0.8) x $122,000 = $24,400

However, since partial goodwill method is adopted, the NCI share of equity needs to be adjusted for the excess cost of acquisition.

Excess cost of acquisition = 80% x $10,000 = $8,000

Adjusted NCI share of equity = $24,400 - $8,000 x (1 - 30%) = $31,400

Therefore, the correct answer is B.

Question 20

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

Accepted Answer

Non-controlling interest is classified as part of the equity of the group according to AASB 10, as it represents the portion of equity in a subsidiary not attributable to the parent company.

Quiz 18: Consolidation: Non-Controlling Interest