Question 1

AASB 12 Disclosure of Interests in Other Entities establishes the disclosures relating to a parent's interests in subsidiaries

Accepted Answer

A) True 
 B)False

Question 2

The 'Transfer from business combination valuation reserve' is an appropriation item that is closed to retained earnings at the end of each year.

Accepted Answer

A) True 
 B)False

Question 3

Hungry Limited acquired 100% of the share capital of Jane Limited for a purchase consideration of $320 000.At acquisition date,the net fair value of Jane Ltd's assets,liabilities and contingent liabilities was $250 000 including goodwill with a carrying amount of $20 000.The company tax rate is 30%.The unrecorded amount of goodwill that must be recognised on the consolidation worksheet is:

Accepted Answer

A) $50 000. 
B) $70 000. 
C) $90 000. 
D) $15 000. 
A) $50 000. 
B) $70 000. 
C) $90 000. 
D) $15 000.

Question 4

The effect of the pre-acquisition entry is to eliminate the 'Shares in subsidiary' asset and the:

Accepted Answer

A) equity of the subsidiary at the acquisition date. 
B) equity of the parent at the acquisition date. 
C) net assets of the subsidiary at the acquisition date. 
D) net assets of the parent at the acquisition date. 
A) equity of the subsidiary at the acquisition date. 
B) equity of the parent at the acquisition date. 
C) net assets of the subsidiary at the acquisition date. 
D) net assets of the parent at the acquisition date.

Question 5

Easts Limited acquired 100% of the shares in Tigers Limited on a cum div.basis for $200 000.At acquisition date,the subsidiary had a declared dividend of $10 000.The pre-acquisition entry must include the following line:

Accepted Answer

A) DR Shares in subsidiary $190 000 
B) CR Shares in subsidiary $200 000 
C) CR Shares in subsidiary $190 000 
D) CR Shares in subsidiary $10 000 
A) DR Shares in subsidiary $190 000 
B) CR Shares in subsidiary $200 000 
C) CR Shares in subsidiary $190 000 
D) CR Shares in subsidiary $10 000

Question 6

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 7

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 transactions that occur between the two reporting dates provided the reporting dates differ by no more than:

Accepted Answer

A) nine months. 
B) three months. 
C) one month. 
D) six months. 
A) nine months. 
B) three months. 
C) one month. 
D) six months.

Question 8

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 9

Consolidated financial statements must be prepared using uniform accounting policies for like transactions and other events in similar circumstances.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following assets cannot be revalued above their cost in the accounting records of the subsidiary?

Accepted Answer

A) Inventory 
B) Plant and equipment 
C) Goodwill 
D) Both a and c 
A) Inventory 
B) Plant and equipment 
C) Goodwill 
D) Both a and c

Question 11

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

Question 12

According to AASB 127 Separate Financial Statements,all dividends paid or payable by the subsidiary to a parent are recognised as revenue in the profit or loss of the parent.

Accepted Answer

A) True 
 B)False

Question 13

Where a subsidiary has goodwill already recorded in their books at the date of acquisition,such goodwill should be eliminated in full and then recognised on consolidation.

Accepted Answer

A) True 
 B)False

Question 14

The acquisition analysis may result in the recognition of assets and liabilities that are not recognised in the subsidiary's accounting records.

Accepted Answer

A) True 
 B)False

Question 15

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 16

AASB 3Business Combinations prohibits the revaluation of the assets of the subsidiary at acquisition date in the records of the subsidiary.

Accepted Answer

A) True 
 B)False

Question 17

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 18

Which of the following statements is correct?

Accepted Answer

A) AASB 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 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 19

On 1 January 2012,Cowboys Ltd acquired all the issued shares in Tate Ltd.At that date,the inventory of Tate Ltd had a fair value of $10 000 more than its carrying amount.By 30 June 2013,75% of the inventory was sold to an entity outside of the group.The business combination valuation consolidation adjustment against inventory in relation to the transaction as at 30 June 2013 will be:

Accepted Answer

A) a debit of $7500. 
B) a credit of $5000. 
C) a debit of $5000. 
D) a debit of $2500. 
A) a debit of $7500. 
B) a credit of $5000. 
C) a debit of $5000. 
D) a debit of $2500.

Question 20

Business combination valuation adjustment entries record only the parent's share of fair value adjustments relating to a subsidiary's assets,liabilities and contingent liabilities.

Accepted Answer

A) True 
 B)False

Exam 19: Consolidation: Wholly Owned Subsidiaries

AASB 12 Disclosure of Interests in Other Entities establishes the disclosures relating to a parent's interests in subsidiaries

The 'Transfer from business combination valuation reserve' is an appropriation item that is closed to retained earnings at the end of each year.

The effect of the pre-acquisition entry is to eliminate the 'Shares in subsidiary' asset and the:

Easts Limited acquired 100% of the shares in Tigers Limited on a cum div.basis for $200 000.At acquisition date,the subsidiary had a declared dividend of $10 000.The pre-acquisition entry must include the following line:

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

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 transactions that occur between the two reporting dates provided the reporting dates differ by no more than:

Consolidated financial statements must be prepared using uniform accounting policies for like transactions and other events in similar circumstances.

Which of the following assets cannot be revalued above their cost in the accounting records of the subsidiary?

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:

According to AASB 127 Separate Financial Statements,all dividends paid or payable by the subsidiary to a parent are recognised as revenue in the profit or loss of the parent.

Where a subsidiary has goodwill already recorded in their books at the date of acquisition,such goodwill should be eliminated in full and then recognised on consolidation.

The acquisition analysis may result in the recognition of assets and liabilities that are not recognised in the subsidiary's accounting records.

Which of the following statements is incorrect?

AASB 3Business Combinations prohibits the revaluation of the assets of the subsidiary at acquisition date in the records of the subsidiary.

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?

Business combination valuation adjustment entries record only the parent's share of fair value adjustments relating to a subsidiary's assets,liabilities and contingent liabilities.

Nature and Regulation of Companies

Financing Company Operations

Company Operations

Fundamental Concepts of Corporate Governance

Fair Value Measurement

Accounting for Company Income Tax

Financial Instruments

Foreign Currency Transactions and Forward Exchange Contracts

Property, Plant and Equipment

Leases

Intangible Assets

Business Combinations

Impairment of Assets

Disclosure: Legal Requirements and Accounting Polices

Disclosure: Presentation of Financial Statements

Disclosure: Statement of Cash Flows

Disclosure: 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

Investments in Joint Arrangements

Insolvency and Liquidation

Filters