Exam 16: Consolidation: Wholly Owned Subsidiaries

Company X acquired Company Y when the carrying value of Company Y's plant was $50 000.The fair value of the plant on acquisition date was $65 000.The company tax rate was 30%.How much is the amount of the business combination valuation reserve that must be recognised?

At acquisition date a wholly owned subsidiary had the following equity items: -Retained earnings $14 000 -Share capital $30 000 -Business combination revaluation reserve $6000 In the year following the acquisition the subsidiary transferred $10 000 from pre-acquisition retained earnings,to a general reserve account.At the reporting date following the reserve transfer,the following consolidation adjustment is needed:

Nelson Limited has two subsidiary entities,Poggi Limited and Holly Limited.Nelson Limited owns 100% of the shares in both entities.Details of issued share capital are: -Nelson Limited $100 000 -Poggi Limited $30 000 -Holly Limited $15 000 The worksheet adjustment entry made in order to determine the amount of consolidated share capital is:

On 1 July 20X6,P Limited acquired all the issued shares of S Limited for $50 000 when the equity of S Limited consisted of: The pre-acquisition entry at 1 July 20X6 is:

If a subsidiary's reporting date does not coincide with the parent entity's reporting date,adjustments must be made for the effects of significant events that occur between the two reporting dates as long as the reporting dates differ by no more than:

If the cost of a business combination is greater than the acquired interest in the net fair value of the identifiable assets,liabilities and contingent liabilities of the acquiree:

Entity A and Entity B agree to merge.The capital structure of each entity is: Entity A - 100 ordinary shares Entity B - 60 ordinary shares Entity A issues 2.5 shares in exchange for each ordinary share of Entity B.All of Entity B's shareholders exchange their shares for Entity A shares. Which of the following statement is correct?

Parent Limited acquired 100% of a subsidiary on 1 July 20X7.At acquisition date the subsidiary had the following equity items: -Retained earnings $24 000 -Share capital $33 000 -Business combination revaluation reserve $10 000 In the year following the acquisition the subsidiary paid a bonus dividend of $14 000 out of pre-acquisition retained earnings.The following consolidation adjustment is needed in the consolidation worksheet for 30 June 20X8:

Eeny Limited has two subsidiary entities,Meeny Limited and Miney Limited.Eeny Limited owns 100% of the shares in both entities.Details of issued share capital are: -Eeny Limited $100 000 -Meeny Limited $30 000 -Miney Limited $15 000 The consolidated share capital amount of the Eeny Meeny Miney group is:

On 1 July 20X6 Possum acquired a 100% interest in Echidna.At that time Echidna had goodwill of $5 000 recorded in its statement of financial position as a result of a previous business combination.The total goodwill arising on Possum's acquisition of Echidna was $12,000.The goodwill recognised on consolidation as a result of Possum's acquisition of Echidna is:

A Limited acquired B Limited for $110 000.At acquisition date the fair value of the B Limited's Land asset was $40 000 and the book value was $30 000.If the company tax rate is 30%,which of the following is the appropriate adjustment to recognise the tax effect of the business combination revaluation of land?

On 1 January 20X2 A Ltd acquired all the issued shares in B Ltd.At that date the inventory of B Ltd had a carrying amount of $5 000 less than its fair value.The inventory was all sold by 30 June 20X4.At 30 June 20X5 the consolidation adjustment against inventory in relation to the transaction will be:

In relation to pre-acquisition of a subsidiary entity,which of the following events can cause a change in the pre-acquisition entry subsequent to acquisition date? I Transfers from post-acquisition retained earnings II Dividends paid from pre-acquisition reserves III Transfers from pre-acquisition retained earnings IV Impairment of goodwill

One year after acquisition date,the goodwill acquired was regarded as having become impaired by $20 000.The appropriate consolidation adjustment in relation to the impairment will include the following line:

When preparing consolidated financial statements,adjustments for pre-acquisition equity and inter-entity transactions are recorded:

The key principle relating to the disclosure of information about business combinations is to disclose information that:

Explain why revaluations of the assets of a subsidiary at acquisition date are normally recorded in the consolidation worksheet and not in the accounting records of the subsidiary.

Explain the function of a consolidation worksheet.

At the date of acquisition a subsidiary had recorded a dividend payable of $10 000.The consolidation adjustment needed at the date of acquisition in relation to this event is:

Explain how consolidated financial statements are prepared.