Chapter 18 - Multiple choice quiz

X Limited has a 70% ownership interest in Y Limited. Y Limited has a 60% ownership interest in Z Limited. X Limited has an indirect ownership interest in Z Limited of:

70%;

42%;

60%;

zero.

K Limited has a direct ownership interest of 80% in L Limited. L Limited has a direct ownership interest of 70% in M Limited. The indirect non-controlling interest in M Limited is:

70%;

56%;

30%;

14%.

An ownership structure in which O Limited acquires shares in P Limited before P Limited acquires shares in Q Limited is known as:

A.	a non-sequential acquisition;

B.	a compound acquisition;

C.	a sequential acquisition;

D.	a multiple acquisition.

Alpha Limited acquired shares in Beta Limited. At the time of this acquisition Beta Limited already held shares in Centaur Limited. This form of acquisition of an indirect interest by Alpha Limited in Centaur Limited is known as:

A.	a non-sequential acquisition;

B.	a predatory acquisition;

C.	a reciprocal acquisition;

D.	an indirect acquisition.

When preparing consolidated financial statements for a multiple subsidiary structure the acquisition analysis:

A.	does not recognise goodwill;

B.	does not recognise a gain on bargain purchase;

C.	is based on carrying values not fair values of the subsidiaries net assets;

D.	is unchanged from the approach used for a single subsidiary structure.

When preparing consolidation adjustment entries to effect a consolidation of a multiple subsidiary structure intragroup transactions:

A.	are not eliminated;

B.	are partially eliminated to the extent of the ownership interest of the parent entity to each transaction;

C.	are ignored as it is impractical to attempt to determine the size of the ownership interest relating to each transaction;

D.	are eliminated in full;

In a multiple subsidiary structure the direct non-controlling interest is entitled to a proportionate share of:

A.	pre-acquisition equity only;

B.	pre and post acquisition amounts of equity;

C.	post-acquisition amounts of equity only;

D.	post-acquisition balance of retained earnings only.

In a multiple subsidiary structure the indirect non-controlling interest is entitled to a proportionate share of:

A.	pre-acquisition equity;

B.	post-acquisition equity only;

C.	both pre and post acquisition equity;

D.	neither pre or post acquisition equity.

When calculating the direct non-controlling interest share of equity, consolidation adjustments are needed to:

A.	eliminate any realised profits or losses from inventory transfers;

B.	recognise any unrealised profits or losses from intragroup service transfers;

C.	fully eliminate any unrealised profits or losses from intragroup transactions;

D.	partially eliminate any unrealised profits from inventory transfers.

10.

An indirect non-controlling interest arises:

A.	only when a full owned subsidiary owns shares in another subsidiary;

B.	when a partly owned subsidiary owns shares in the parent entity;

C.	when a wholly owned subsidiary owns shares in the parent entity;

D.	only when a partly owned subsidiary holds shares in another subsidiary.

11.

Kelvin Limited has a direct ownership interest of 90% in Lane Limited. Lane Limited holds 80% of the shares of Cookies Limited. As a result of this multiple subsidiary structure the parent entity indirectly owns:

A.	72% of Cookies Limited;

B.	20% of Cookies Limited;

C.	8% of Cookies Limited;

D.	no share in Cookies Limited.

12.

Realty group prepared the following acquisition date entry in order to consolidate a 60% indirect interest in a subsidiary. Retained earnings $30 000, Share capital $60 000, General Reserve $12 000, BCVR $6 000. The amount attributable to the direct non-controlling interest is:

$43 200;

$72 000;

$108 000;

$180 000.

13.

The Noor group prepared the following acquisition date entry in order to consolidate a 70% indirect interest in a subsidiary. Retained earnings $35 000, Share capital $70 000, BCVR $21 000. The amount attributable to the indirect non-controlling interest is:

$0;

$54 000;

$126 000;

$180 000.

14.

Tribulation Limited has an ownership interest of 80% in a subsidiary Trouble Limited. Trouble owns 60% of Strife Limited. Since acquisition date the retained earnings of Strife Limited have increased from $80 000 to $130 000. The direct non-controlling interest in the retained earnings of Strife is:

$0;

$20 000;

$32 000;

$52 000.

15.

John Limited has an ownership interest of 80% in a subsidiary Jack Limited. Jack Limited owns 60% of Jill Limited. At acquisition date the retained earnings of Jill Limited were $100 000. At consolidation date the retained earnings of Jill Limited were $220 000. The indirect non-controlling interest in the retained earnings of Jill Limited is calculated as:

$0;

$12 000;

$14 400;

$26 400.

16.

Jacaranda Limited acquired a 75% ownership interest in Frangipani Limited on 30 June 20X7. On the same day, Frangipani Limited acquired a 60% ownership interest in Gardener Limited.

The following interentity transactions have taken place between the entities in the group during the years ended 30 June 20X8 and 30 June 20X9:

- On 1 July 20X7 Gardener sold an item of plant to Jacaranda for a profit of $25,000. The remaining useful life of the plant at the date of transfer was 2 years.
- On 1 September 20X7, Gardener paid a dividend of $100,000 from profits earned prior to 30 June 20X7.
- Jacaranda lent $500,000 to Gardener on 1 January 20X8. Interest charged on the loan for the year ended 30 June 20X8 was $20,000 and for the year ended 30 June 20X9 was $40,000.
- On 31 May 20X8 Frangipani sold inventory to Gardener for $15,000. Profit earned on the sale was $1,500. Gardener sold the inventory to external parties on 1 August 20X8.

Details of profits earned by entities within the group for the years ended 30 June 20X8 and 30 June 20X9 are:

	30 June 20X8	30 June 20X9
Jacaranda	100,000	125,000
Frangipani	45,000	70,000
Gardener	20,000	35,000

The tax rate is 30%.
The non-controlling interest share of profit in the Frangipani group for the year ended 30 June 20X8 is:

A.	$14,812.50

B.	$15,487.50

C.	$17,175.00

D.	$21,987.50

17.

	30 June 20X8	30 June 20X9
Jacaranda	100,000	125,000
Frangipani	45,000	70,000
Gardener	20,000	35,000

The tax rate is 30%.
The non-controlling share of profit in Gardener for the year ended 30 June 20X9 is:

A.	$19,250.00

B.	$24,062.50

C.	$33,500.00

D.	$46,062.50

18.

	30 June 20X8	30 June 20X9
Jacaranda	100,000	125,000
Frangipani	45,000	70,000
Gardener	20,000	35,000

The tax rate is 30%.
effect of the dividend paid by Gardener to Frangipani on the NCI of Gardener for the year ended 30 June 20X8 is:

NIL

$15,000

$40,000

$55,000

19.

Rose Limited is the parent entity in the Flower group of companies. Rose Limited acquired a direct ownership interest in Vase Limited on 30 June 20X9. Vase Limited has an ownership interest in Gardener Limited which it acquired on 30 June 20X7. This group structure is an example of a:

A.	sequential acquisition;

B.	non-sequential acquisition;

C.	reciprocal shareholding;

D.	cross-holding of shares.

20.

A reciprocal interest arises where:

A.	a parent holds an ownership interest in a subsidiary;

B.	a subsidiary holds an ownership interest in a parent;

C.	a parent holds an ownership interest in a subsidiary and the subsidiary has an interest in another subsidiary;

D.	a subsidiary holds an ownership interest in another subsidiary.

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