Exam 27: Consolidation: Wholly Owned Entities

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 as at 30 June 2013 will be:

Titans Ltd acquired 100% of Taylor Ltd on 1 July 2014. At acquisition date, Taylor Ltd had the following equity items: In the year following the acquisition, Taylor Ltd paid a bonus share dividend of $28 000 out of pre-acquisition retained earnings. Which of the following consolidation adjustments is needed in the consolidation worksheet for 30 June 2015?

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:

The acquisition analysis calculates the fair value of the net identifiable assets and liabilities acquired based on the book value of the pre-acquisition equity of the subsidiary, adjusted for the following:

The consolidation worksheet entries have an impact on:

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?

Unity Limited acquired 100% of the share capital of Bellvista Limited. Bellvista had total shareholder's equity of $200 000. The book values of Bellvista Limited's assets were: buildings $100 000, machinery $120 000. The fair values of these assets were: buildings $180 000, machinery $140 000. The tax rate is 30%. The fair value of the identifiable net assets is:

Which of the following statements is incorrect?

The pre-acquisition entries are used to:

There is no recognition of a deferred tax item in respect to goodwill because it is a residual amount and the recognition of a deferred tax item would:

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:

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 for inventories as at 30 June 2013 will include:

On 1 January 2014, Cowboys Ltd acquired all the issued shares in Tate Ltd. At that date, Tate Ltd recognised in the notes to its financial statements a contingent liability with regards to a loan guarantee that had a fair value of $20 000. The contingent liability was settled at 31 December 2014 by Tate Ltd making a payment of $5 000. Ignoring the tax effect, the business combination valuation entries in relation to the contingent liability as at 30 June 2015 will include: I. Adjustments to the liability account to recognise the fair value adjustment at acquisition date II. Adjustments to expenses recognised on settlement III. Adjustments to gains on settlement IV. Transfers from business combination valuation reserve to retained earnings

Kerri Limited has two subsidiary entities, Emily Limited and Georgia Limited. Kerri Limited owns 100% of the shares in both entities. Details of the issued share capital are: The consolidated share capital amount of the Kerri - Emily - Georgia group is:

The preparation of consolidated financial statements involves:

According to AASB 3 Business Combinations, the key principle relating to the disclosure of information about business combinations is to disclose information that:

On 1 January 2014, Cowboys Ltd acquired all the issued shares in Tate Ltd. At that date, the plant of Tate Ltd had a fair value of $20 000 more than its carrying amount and an estimated useful life of 5 years. Tate Ltd depreciates the plant on a straight-line basis. The plant was sold to external parties on 31 December 2014. The business combination valuation entries in relation to the plant as at 30 June 2015 will include: I. Adjustments to the plant account to recognise the fair value adjustment at acquisition date II. Adjustments to the current depreciation expense III. Adjustments to retained earnings (opening balance) IV. Transfers from business combination valuation reserve to retained earnings

Unity Limited acquired 100% of the share capital of Bellvista Limited for $300 000. Bellvista had total shareholder's equity of $200 000. The book values of Bellvista Limited's assets were: buildings $100 000, machinery $120 000. The fair values of these assets were: buildings $180 000, machinery $140 000. The tax rate is 30%. The acquisition analysis will determine:

Salmon Ltd acquired on a cum div. basis all of shares in Trout Ltd for $520 000. At the date of acquisition, Trout Ltd had recorded a dividend payable of $100 000 and a total shareholders' equity of $400 000. Assuming that the all identifiable assets in Trout Ltd were recorded at fair value at acquisition date, the consolidation worksheet entries will have to recognise:

At the date of acquisition, a subsidiary had recorded a dividend payable of $100 000. Assuming that the shares were acquired on a cum div. basis, the consolidation adjustment needed at the date of acquisition to eliminate the dividend is: