Week 9 Quiz

1. Which of the following is not one of the stages used to determine non-controlling interest?
A The non-controlling interest in the goodwill at acquisition.

.
B The non-controlling interest in share capital at the date of acquisition of the subsidiary by the
. parent entity.
C The non-controlling interest in reserves at the date of acquisition of the subsidiary by the parent
. entity.
D The non-controlling interest in the current period's profit or loss.
.
2. On 1 July 2012, Han Solo Ltd acquired 80 per cent of the share capital of Chewbacca Ltd for $400 000,
which represented the fair value of the consideration paid, when the share capital and reserves of
Chewbacca Ltd were:
All assets of Chewbacca Ltd were recorded at fair value at acquisition date, except for equipment that had a fair
value $20 000 greater than its carrying amount. The cost of the equipment was $40 000 and it had accumulated
depreciation of $10 000. The tax rate is 30 per cent.
Using the partial goodwill method, what is the amount of fair value adjustment and goodwill, respectively, on 1
July 2012 for non-controlling interests in Chewbacca Ltd?
A $ 2 800; $22 200
.
B $ 2800; zero
.
C $11 200; $88 800
.
D $11 200; 22 200
.
3. As prescribed in AASB 10, which of the following statements is incorrect with regards to non-
controlling interests in subsidiaries?
A Total comprehensive income is attributed to the owners of the parent and to the non-controlling
. interests even if this results in the non-controlling interests having a deficit balance.
B All of the given statements are correct.
.
C Non-controlling interests are presented in the consolidated statement of financial position within
. equity, separately from the equity of the owners of the parent.
D Profit or loss and each component of other comprehensive income are attributed to the owners
. of the parent and to the non-controlling interests.
4. Which of the following is not correct about the general principles for calculating non-
controlling interests in profits?
A For profits relating to transactions that do not involve the transfer of assets, adjustments are
. necessary.
B Adjustments are not needed for unrealised gains or losses made by the parent entity when
. calculating the non-controlling interest in profits.
C Make adjustments for profits or losses made by the subsidiary to the extent they
. are unrealised from the economic entity's perspective; that is, the respective asset is still on
hand at the end of the reporting period.
D Need to make adjustments to non-controlling interests' share of profits only where an
. intragroup transaction affects the subsidiary's profit or loss.
5. Buster Ltd owns 85 per cent of the issued capital of Rhymes Ltd. During the
period ended 30 June 2016 the operating profit of Rhymes Ltd was $680 000.
Buster Ltd bought goods for $540 000 from Rhymes. The goods cost Rhymes
$400 000 and at the end of the period none of this inventory was still on hand.
Rhymes paid Buster a management fee of $100 000 during the period. Goodwill
on consolidation was impaired by $30 000. Rhymes paid a dividend of $40 000 at
the end of the period.
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What is the non-controlling interest in the operating profit of Rhymes Ltd?
A $102 000
.
B $87 000
.
C $101 969
.
D $112 500
.
6. Finger Ltd purchased 75 per cent of the issued capital and in the process gained control over Nail Ltd
on 1 July 2013. The fair value of the net assets of Nail Ltd at purchase was represented by:
Finger Ltd paid cash consideration of $4 000 000 for Nail Ltd. During the period ended 30 June 2015, Nail Ltd
paid management fees of $540 000 to Finger Ltd and Nails had an operating profit of $980 000. Nails' opening
retained earnings at the beginning of the period were $1 460 000. At the end of the period Nail Ltd declared a
dividend of $90 000. There were no other inter-company transactions. Goodwill was determined to have been
impaired by $19 000 during the period. Companies in the group accrue dividends when they are declared by
subsidiaries.
For the period ended 30 June 2015, what consolidation journal entries are required and what is the non-
controlling interest
A Consolidation journal entries:
.
3 760
Dr Share capital
000
Dr Retained earnings 1 320 000
Cr Non-controlling interest 1 080 000
Investment in Wills Ltd 4 000
Cr
000
Dr Impairment loss 19 000

Accumulated impairment
Cr 19 000
loss
Dr Management fee revenue 540 000

Management fee expense
Cr 540 000
Dr Dividend payable 67 500

Cr Dividend receivable 67 500
Non-controlling interest:
Operating profit 245 000
Dividend 22 500
Total
267 500
B Consolidation journal entries:
.
2 820
Dr Share capital
000
Dr Retained earnings 1 320 000
Cr Non-controlling interest 140 000
Cr
000

Cr Non-controlling interest 14 000

Cr 540 000

Dr Dividend revenue 67 500

Cr Dividend declared 67 500
Opening retained earnings 342 500
Share capital 940 000
Total
1 640 000
C Consolidation journal entries:
.
2 820
Dr Share capital
000
Dr Retained earnings 990 000
Cr
000

Cr 540 000

Total
1 550 000
D Consolidation journal entries:
.
2 820
Dr Share capital
000
Dr Goodwill 190 000
Cr
000

Cr 19 000
loss

Cr 540 000

Cr Dividend declared 67 500
Dr Dividend revenue 67 500

Dividend (22 500)
Total
1 527 500
7. Which of the following dividends are included in the consolidated financial statements?
A No dividends; all are eliminated in consolidation entries.
.
B Dividends payable by the subsidiary to non-controlling interests.
.
C Dividends paid by the parent entity to external shareholders only.
.
D Both dividends payable by the subsidiary to non-controlling interests and by the parent entity to
. external shareholders.
8. Which of the following statements is incorrect with regards to non-controlling interests in

subsidiaries?
A The non-controlling interest's share of the profits of the subsidiary is calculated after
. adjustments to eliminate income and expenses of the subsidiary that are realised from the
economic entity's perspective.
B The non-controlling interest's share in the dividends paid or proposed by the subsidiary is not
. eliminated on consolidation.
C The requirement to eliminate the effects of intragroup transactions does not hold when there
. are non-controlling interests.
D Management fees paid in an intragroup transaction are considered realised when determining
. non-controlling interests in a subsidiary.
9. Where the parent entity holds less than 100 per cent interest in a subsidiary, AASB 10
requires the remaining shareholders' interests in what items to be disclosed?
A The subsidiary's share capital and reserves and the subsidiary's profit or loss.
.
B The subsidiary's current and non-current assets.
.
C The subsidiary's share capital and reserves.
.
D The subsidiary's profit or loss.
.
10. On 1 July 2015 Harry Ltd purchased 80 per cent of the issued share capital of Wills Ltd and has control
of Wills. The fair value of the net assets of Wills Ltd on that date was represented as follows:
Harry Ltd paid cash consideration of $2 500 000 for Wills. Wills Ltd made an operating profit of $350 000, there
were no intragroup transactions during the period ended 30 June 2016. Goodwill had been determined to have
been impaired during the year by $25 000. What consolidation journal entries are required for the period and
what is the non-controlling interest in equity as at 30 June 2016?
A Consolidation journal entries:
.
1 600
Dr Share capital
000
Dr Goodwill 500 000
Cr
000

Cr 25 000
loss
Goodwill 125 000
Total
693 750
B Consolidation journal entries:
.
2 000
Dr Share capital
000
Cr
000
Retained earnings 100 000
Total
500 000
C Consolidation journal entries:

.
1 600
Dr Share capital
000
Dr Goodwill 500 000
Cr
000

Cr 25 000
loss
Total
570 000
D Consolidation journal entries:
.
1 600
Dr Share capital
000
Dr Goodwill 500 000
Cr
000

Cr 25 000
loss
Total
565 000
11. Calculating goodwill for a subsidiary that has a non-controlling interest involves:
A taking the book value of equity of the subsidiary and deducting the fair value of the
. consideration paid for the subsidiary.
B taking the parent entity's share of the fair value of the identifiable net assets of the subsidiary
. and deducting it from the fair value of the consideration paid.
C dividing the fair value of the consideration paid for the subsidiary by the percentage ownership
. of the parent entity and deducting the fair value of the identifiable net assets of the subsidiary
from that amount.
D dividing the fair value of the identifiable net assets of the subsidiary by the percentage
. ownership of the parent entity and deducting this amount from the fair value of the
consideration paid.
12. Acquirer Limited purchased 75 per cent of Subby Limited for $45 000. The fair value of
identifiable assets was $95 000, and the fair value of liabilities and contingent liabilities
amounted to $47 000. According to AASB 10, what would be the amount of 'goodwill allocated
to non-controlling interests of Subby Limited'?
A $9000
.
B ($3000)
.
C $12 000
.
D $3000
.
13. Non-controlling interests arise when:

A the parent entity does not control a subsidiary in the group.
.
B the subsidiary has owners of equity who are not owners through their ownership interest in the
. controlling parent entity.
C the parent entity raises capital through preference shares that have the characteristics of debt
. to fund the subsidiary.
D the subsidiary has invested in other entities in which it does not have a controlling interest.
.
14. Which of the following situations, involving eliminations as part of the consolidation process,
would not have implications for the calculation of non-controlling interest?
A The sale of a non-current asset by the subsidiary to the parent.
.
B The payment of a management fee by the subsidiary to the parent.
.
C The sale of inventory by the parent to the subsidiary.
.
D The payment of a management fee by the subsidiary to the parent and the sale of inventory by
. the parent to the subsidiary.
15. When a subsidiary company that has a non-controlling interest (NCI) declares a dividend, the
treatment in the consolidated statement of financial position of dividends not paid is:
A the amount of dividends payable to both the parent entity and the NCI will be reflected in the
. consolidated statement of financial position.
B the non-controlling interest portion of the dividend owing should be eliminated along with the
. parent entity's share, leaving a zero balance in dividends payable.
C the amount owing to NCI as a dividend payable should be included in the consolidated
. statement of financial position as a current liability.
D the NCI's portion should be deducted from the non-controlling interest's share in equity. There
. should be no dividend amounts remaining in the consolidated statement of financial position,
but the amount owed to the NCI should be disclosed separately.
16. After eliminating the dividend payable to the parent, the balance of the dividend payable to
the non-controlling interest will be:
A transferred into a non-controlling interest reserve account.
.
B recognised as an expense in the consolidated financial statements.
.
C eliminated as well.
.
D included within the consolidated financial statements.
.
17. There is no adjustment for things such as management fees when determining non-
controlling interest, because:
A they do not involve non-controlling interest.
.
B they relate only to the parent entity.
.
C they are not a material item.
.
D they are considered to be realised.
.
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1. Which of the following is not one of the stages used to determine non-controlling interest?

A The non-controlling interest in the goodwill at acquisition.

Dr Impairment loss 19 000

Dr Management fee revenue 540 000

Dr Dividend payable 67 500

Dr Impairment loss 14 000

Dr Management fee revenue 540 000

Dr Dividend payable 67 500

Dr Dividend revenue 67 500

Dr Management fee revenue 540 000

Dr Dividend payable 90 000

Dr Impairment loss 19 000

Dr Management fee revenue 540 000

Dr Dividend payable 67 500

Dr Dividend revenue 67 500

8. Which of the following statements is incorrect with regards to non-controlling interests in

Dr Impairment loss 25 000

C Consolidation journal entries:

Dr Impairment loss 25 000

Dr Impairment loss 25 000

13. Non-controlling interests arise when:

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