Question 1

The following are regarded as factors indicating the existence of significant influence over another entity:

Accepted Answer

A)  I. 
B)  II. 
C)  III. 
D)  IV. 
A)  I. 
B)  II. 
C)  III. 
D)  IV.

Question 2

Where an investor sells inventories to an associate and the inventories are still on hand at the end of the year the investor's share of the associate's profits is:

Accepted Answer

A)  not affected as unrealised profits are only considered to arise in a parent-subsidiary relationship. 
B)  not affected as the unrealised profit is in the books of the investor, not the associate. 
C)  increased by the investor's share of the unrealised profit. 
D)  decreased by the investor's share of the unrealised profit. 
A)  not affected as unrealised profits are only considered to arise in a parent-subsidiary relationship. 
B)  not affected as the unrealised profit is in the books of the investor, not the associate. 
C)  increased by the investor's share of the unrealised profit. 
D)  decreased by the investor's share of the unrealised profit.

Question 3

Clovelly Ltd, owns 25% of Bronte Ltd. Bronte's profit after tax for the year ended 30 June 20X3 is $30 000. The tax rate is 30%. During the year ended 30 June 20X4, Bronte sold $5000 worth of inventories to Clovelly. These items had previously cost Bronte $3000. All the items remain unsold by the Clovelly at 30 June 20X3. Clovelly's share of Bronte's profit for the year ended 30 June 20X3 is:

Accepted Answer

A)  $5500. 
B)  $6250. 
C)  $7150. 
D)  $7000. 
A)  $5500. 
B)  $6250. 
C)  $7150. 
D)  $7000.

Question 4

If an associate incurs losses the investor is required to:

Accepted Answer

A)  ignore the losses for the purposes of equity accounting adjustments. 
B)  recognise losses only to the point where the carrying amount is equal to the initial investment. 
C)  recognise losses to the point where the carrying amount of the investment is zero. 
D)  reclassify the investment as a current asset. 
A)  ignore the losses for the purposes of equity accounting adjustments. 
B)  recognise losses only to the point where the carrying amount is equal to the initial investment. 
C)  recognise losses to the point where the carrying amount of the investment is zero. 
D)  reclassify the investment as a current asset.

Question 5

For the purposes of equity accounting for an investment in an associate, it is presumed that the investor has significant influence over the other entity where the investor holds:

Accepted Answer

A)  between 1% and 5% of the voting power of the investee. 
B)  between 5% and 10% of the voting power of the investee. 
C)  20% or more of the voting power of the investee. 
D)  50% or more of the voting power of the investee. 
A)  between 1% and 5% of the voting power of the investee. 
B)  between 5% and 10% of the voting power of the investee. 
C)  20% or more of the voting power of the investee. 
D)  50% or more of the voting power of the investee.

Question 6

Gunawan Limited acquired a 20% share in Juliano Limited for $18 000. Gunawan Limited has no other investments. At the date on which it became an associate, Juliano Limited had the following equity (which reflected the fair value of net assets on that date):
Share capital $50 000
Retained earnings $40 000
At the end of the financial year following the investment, Juliano Limited generated a profit of $6000. After applying the equity method of accounting, Gunawan Limited will have the following carrying amount for the investment:

Accepted Answer

A)  $9 200 
B)  $16 800 
C)  $18 000 
D)  $19 200 
A)  $9 200 
B)  $16 800 
C)  $18 000 
D)  $19 200

The following are regarded as factors indicating the existence of significant influence over another entity:

Where an investor sells inventories to an associate and the inventories are still on hand at the end of the year the investor's share of the associate's profits is:

If an associate incurs losses the investor is required to:

For the purposes of equity accounting for an investment in an associate, it is presumed that the investor has significant influence over the other entity where the investor holds:

Accounting Regulation and the Conceptual Framework

Application of Accounting Theory

Fair Value Measurement

Inventories

Property, Plant and Equipment

Intangible Assets

Impairment of Assets

Provisions, Contingent Liabilities and Contingent Assets

Employee Benefits

Leases

Financial Instruments

Income Taxes

Share Capital and Reserves

Share-Based Payment

Revenue

Presentation of Financial Statements

Statement of Cash Flows

Accounting Policies and Other Disclosures

Earnings Per Share

Operating Segments

Related Party Disclosures

Sustainability and Corporate Social Responsibility Reporting

Foreign Currency Transactions and Forward Exchange Contracts

Translation of Foreign Currency Financial Statements

Business Combinations

Consolidation: Controlled Entities

Consolidation: Wholly Owned Entities

Consolidation: Intragroup Transactions

Consolidation: Non-Controlling Interest

Consolidation: Other Issues

Joint Arrangements

Insolvency and Liquidation

Accounting for Mineral Resources

Agriculture

Filters

Exam 31: Associates and Joint Ventures

The following are regarded as factors indicating the existence of significant influence over another entity:

Where an investor sells inventories to an associate and the inventories are still on hand at the end of the year the investor's share of the associate's profits is:

If an associate incurs losses the investor is required to:

For the purposes of equity accounting for an investment in an associate, it is presumed that the investor has significant influence over the other entity where the investor holds:

Accounting Regulation and the Conceptual Framework

Application of Accounting Theory

Fair Value Measurement

Inventories

Property, Plant and Equipment

Intangible Assets

Impairment of Assets

Provisions, Contingent Liabilities and Contingent Assets

Employee Benefits

Leases

Financial Instruments

Income Taxes

Share Capital and Reserves

Share-Based Payment

Revenue

Presentation of Financial Statements

Statement of Cash Flows

Accounting Policies and Other Disclosures

Earnings Per Share

Operating Segments

Related Party Disclosures

Sustainability and Corporate Social Responsibility Reporting

Foreign Currency Transactions and Forward Exchange Contracts

Translation of Foreign Currency Financial Statements

Business Combinations

Consolidation: Controlled Entities

Consolidation: Wholly Owned Entities

Consolidation: Intragroup Transactions

Consolidation: Non-Controlling Interest

Consolidation: Other Issues

Joint Arrangements

Insolvency and Liquidation

Accounting for Mineral Resources

Agriculture

Filters