Chapter 17 - Multiple choice quiz

Ownership interests in a subsidiary entity other than the parent's interest are referred to as:

A.	outside interests;

B.	partial interests;

C.	minority interests;

D.	non-controlling interests.

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.

When presenting a consolidated statement of financial position the non-controlling interest is:

A.	presented separately within the non-current liability section;

B.	presented as a separate component of total assets and total liabilities;

C.	presented separately within the equity section;

D.	shown as a separate portion of net assets.

Under the conceptual framework for international financial reporting a non-controlling interest fits the definition of:

A.	a liability;

B.	an equity item;

an asset;

D.	an expense.

When presenting a consolidated income statement the non-controlling interest is:

A.	shown as a separate component of each line item;

B.	shown as a separate component of profit before tax and a separate component of tax expense;

C.	presented as a separate portion of gross profit;

D.	presented as a separate portion of profit or loss attributable to the non-controlling interest.

When presenting a consolidated statement of changes in equity:

A.	the minority interest's share of each item of equity must be separately presented;

B.	it is only necessary to show a one-line item reflecting the minority interest's share of the net change;

C.	the minority interest is not shown;

D.	it is only necessary to show the minority interest in the closing balance of equity.

If a subsidiary is not wholly owned the assets, liabilities and contingent liabilities of the subsidiary must be revalued using the following valuation method:

A.	historic cost;

B.	liquidation value;

C.	fair value;

D.	lower of cost or market value.

X Limited paid $120 000 for 70% of Y Limited. At the date of acquisition Y Limited had Share capital of $100 000 and Retained earnings of $50 000 and all of Y Limited's assets and liabilities were recorded at fair value. The net fair value acquired by X Limited amounted to:

$35 000;

$70 000;

$105 000;

$120 000.

Janice Limited acquired 80% of the share capital and reserves of Lesley Limited for $200 000. Share capital was $100 000 and reserves amounted to $60 000. All assets and liabilities were recorded at fair value except Buildings which was recorded at $10 000 below fair value. The company tax rate was 30%. The amount of goodwill recognised under the partial goodwill method in this business combination was:

$33 000;

$40 000;

$66 400;

$72 000.

10.

When determining the amount of goodwill to be presented in a set of consolidated financial statements under the partial goodwill method:

A.	the goodwill acquired by the parent is inflated to include a notional goodwill component for the non-controlling interests;

B.	the goodwill acquired is apportioned between the parent and the non-controlling interest;

C.	the goodwill acquired by the non-controlling interest is included in the pre-acquisition adjustment;

D.	only the goodwill acquired by the parent is recognised.

11.

When preparing a set of consolidated financial statements, the pre-acquisition adjustment 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.

12.

When a subsidiary's assets are revalued up to fair value on consolidation the following tax effect occurs:

A.	a temporary taxable difference reverses;

B.	a temporary deductible difference arises;

C.	deferred tax liability increases;

D.	deferred tax liability decreases.

13.

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.

14.

The non-controlling interest columns on a consolidation worksheet are used to:

A.	adjust the amounts that have been recorded for intragroup revenue transactions;

B.	adjust the amounts that have been recorded for intragroup services;

C.	eliminate the recorded amounts of the non-controlling investment in the subsidiary;

D.	compile the amounts of non-controlling interest and parent share of particular line items.

15.

A non-controlling interest in the net assets of a subsidiary consists of the amount of those non-controlling interests at the date of the business combination:

A.	less 100% of any post-acquisition dividends paid;

B.	less the parent's share of any post-acquisition dividends paid or declared;

C.	plus a share of the changes in equity since the business combination;

D.	less the non-controlling proportionate share of changes since the combination.

16.

A non-controlling interest in a subsidiary entity is entitled to a share of the following items:

	I	II	III	IV
Subsidiary equity acquisition date	Yes	Yes	Yes	Yes
Changes in equity since acquisition date	Yes	No	No	Yes
Changes in equity of the current period	No	Yes	No	Yes

II;

III;

IV.

17.

Vampire Limited acquired a 70% interest in Empire Limited when the retained earnings of Empire Limited amounted to $20 000. At the beginning of the current period the Retained earnings balance of Empire Limited was $50 000 and current period profits for Empire Limited amounted to $10 000. The non-controlling interest in the equity of Empire Limited is:

$18 000;

$24 000;

$42 000;

$56 000.

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 (not the non-controlling party) 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.

19.

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

A.	insignificant and so not adjusted on consolidation;

B.	extraordinary and so ignored for consolidation reporting purposes;

C.	immediately realised;

D.	unrealised.

20.

In respect to a gain on bargain purchase arising on an acquisition, the non-controlling interest is entitled to:

A.	100% of the gain;

B.	a proportionate share based on the extent of its share ownership in the subsidiary;

C.	a proportionate share of the gain after adjustments for tax effects have been made;

zero.

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