Question 1

An acquisition analysis is prepared at acquisition date to identify the fair values of the identifiable assets and liabilities of the parent.

Accepted Answer

A) True 
 B)False

Question 2

In preparing the consolidated financial statements, no adjustments are made in the accounting records of the individual entities that comprise the group.

Accepted Answer

A) True 
 B)False

Question 3

In the case of a reverse acquisition, the subsidiary effectively becomes the acquirer and:

Accepted Answer

A)  its assets and liabilities are measured at cost. 
B)  the parent's assets and liabilities are measured at fair value. 
C)  its assets and liabilities are measured at fair value. 
D)  none of the above. 
A)  its assets and liabilities are measured at cost. 
B)  the parent's assets and liabilities are measured at fair value. 
C)  its assets and liabilities are measured at fair value. 
D)  none of the above.

Question 4

When Wayne Ltd acquired 100% of the share capital of Carol Ltd, the carrying amount of Carol Ltd's machinery was $200 000. The fair value of the machinery on acquisition date was $160 000. The company tax rate was 30%. What is the amount of the business combination valuation reserve that will be recognised on consolidation?

Accepted Answer

A)  $40 000 
B)  $12 000 
C)  $28 000 
D)  $160 000 
A)  $40 000 
B)  $12 000 
C)  $28 000 
D)  $160 000

Question 5

The pre-acquisition entry is necessary to:

Accepted Answer

A)  avoid overstating the equity and net assets of the parent. 
B)  record the 'Shares in subsidiary' account in the parents records. 
C)  avoid overstating the equity and net assets of the group. 
D)  avoid understating the equity and net assets of the group. 
A)  avoid overstating the equity and net assets of the parent. 
B)  record the 'Shares in subsidiary' account in the parents records. 
C)  avoid overstating the equity and net assets of the group. 
D)  avoid understating the equity and net assets of the group.

Question 6

A reverse acquisition occurs when the legal subsidiary in a business combination obtains control over the legal parent.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following statements is correct?

Accepted Answer

A)  AASB 3/IFRS 3 Business Combinations requires that any revaluations of a subsidiary's assets at acquisition date must be done in the consolidation worksheet. 
B)  The revaluation of non-current assets in the subsidiary's records means that the subsidiary has adopted the cost model of accounting for those assets. 
C)  Revaluations of assets such as goodwill and inventory are not permitted in the accounting records of the subsidiary. 
D)  Inventory can be revalued to an amount greater than its cost in the records of the subsidiary. 
A)  AASB 3/IFRS 3 Business Combinations requires that any revaluations of a subsidiary's assets at acquisition date must be done in the consolidation worksheet. 
B)  The revaluation of non-current assets in the subsidiary's records means that the subsidiary has adopted the cost model of accounting for those assets. 
C)  Revaluations of assets such as goodwill and inventory are not permitted in the accounting records of the subsidiary. 
D)  Inventory can be revalued to an amount greater than its cost in the records of the subsidiary.

Question 8

Which of the following statements is incorrect?

Accepted Answer

A)  Where consolidated financial statements are prepared over a number of years, consolidation entries need to be made every time a consolidation worksheet is prepared. 
B)  Consolidation adjusting entries affect the ledger accounts of the parent and subsidiaries. 
C)  A consolidation worksheet is used to help the process of adding together the financial statements of the parent and its subsidiaries. 
D)  There are no consolidated ledger accounts. 
A)  Where consolidated financial statements are prepared over a number of years, consolidation entries need to be made every time a consolidation worksheet is prepared. 
B)  Consolidation adjusting entries affect the ledger accounts of the parent and subsidiaries. 
C)  A consolidation worksheet is used to help the process of adding together the financial statements of the parent and its subsidiaries. 
D)  There are no consolidated ledger accounts.

Question 9

Sippy Ltd acquired 100% of the share capital of Downs Ltd when the carrying value of Downs Ltd's plant and machinery was $100 000. The fair value of the plant on acquisition date was $150 000. The company tax rate was 30%. What is the amount of the business combination valuation reserve that must be recognised on consolidation?

Accepted Answer

A)  $15 000 
B)  $35 000 
C)  $50 000 
D)  $150 000 
A)  $15 000 
B)  $35 000 
C)  $50 000 
D)  $150 000

Question 10

One year after acquisition date, the goodwill acquired was regarded as having become impaired by $40 000. The appropriate consolidation adjustment in relation to the impairment will include the following line:

Accepted Answer

A)  DR Goodwill $40 000 
B)  CR Impairment expense $40 000 
C)  CR Business combination valuation reserve $40 000 
D)  CR Accumulated impairment losses $40 000 
A)  DR Goodwill $40 000 
B)  CR Impairment expense $40 000 
C)  CR Business combination valuation reserve $40 000 
D)  CR Accumulated impairment losses $40 000

An acquisition analysis is prepared at acquisition date to identify the fair values of the identifiable assets and liabilities of the parent.

In preparing the consolidated financial statements, no adjustments are made in the accounting records of the individual entities that comprise the group.

In the case of a reverse acquisition, the subsidiary effectively becomes the acquirer and:

The pre-acquisition entry is necessary to:

A reverse acquisition occurs when the legal subsidiary in a business combination obtains control over the legal parent.

Which of the following statements is correct?

Which of the following statements is incorrect?

One year after acquisition date, the goodwill acquired was regarded as having become impaired by $40 000. The appropriate consolidation adjustment in relation to the impairment will include the following line:

Nature and Regulation of Companies

Financing Company Operations

Business Combinations

Disclosure: Legal Requirements and Accounting Polices

Disclosure: Presentation of Financial Statements

Disclosure: Statement of Cash Flows

Foreign Currency Transactions and Forward Exchange Contracts

Translation of Financial Statements Into a Presentation Currency

Consolidation: Controlled Entities

Consolidation: Intragroup Transactions

Consolidation: Non-Controlling Interest

Consolidation: Other Issues

Associates and Joint Ventures

Joint Arrangements

Insolvency and Liquidation

Accounting for Company Income Tax

Property, Plant Equipment

Filters

Exam 10: Consolidation: Wholly Owned Subsidiaries

An acquisition analysis is prepared at acquisition date to identify the fair values of the identifiable assets and liabilities of the parent.

In preparing the consolidated financial statements, no adjustments are made in the accounting records of the individual entities that comprise the group.

In the case of a reverse acquisition, the subsidiary effectively becomes the acquirer and:

The pre-acquisition entry is necessary to:

A reverse acquisition occurs when the legal subsidiary in a business combination obtains control over the legal parent.

Which of the following statements is correct?

Which of the following statements is incorrect?

One year after acquisition date, the goodwill acquired was regarded as having become impaired by $40 000. The appropriate consolidation adjustment in relation to the impairment will include the following line:

Nature and Regulation of Companies

Financing Company Operations

Business Combinations

Disclosure: Legal Requirements and Accounting Polices

Disclosure: Presentation of Financial Statements

Disclosure: Statement of Cash Flows

Foreign Currency Transactions and Forward Exchange Contracts

Translation of Financial Statements Into a Presentation Currency

Consolidation: Controlled Entities

Consolidation: Intragroup Transactions

Consolidation: Non-Controlling Interest

Consolidation: Other Issues

Associates and Joint Ventures

Joint Arrangements

Insolvency and Liquidation

Accounting for Company Income Tax

Property, Plant Equipment

Filters