11 A subsidiary entity sold goods to its parent entity for $125 000. The inventories originally cost the subsidiary $100 000. At reporting date, the parent still held all of the inventories.

Which of the following adjustments must be included as part of the consolidation entry to eliminate this transaction?

Select one:

Cr Inventory $25 000

Dr Inventory $25 000

Cr Inventory $100 000

Dr Inventory $100 000

12 Straw Limited acquired a 20% interest in Berry Limited for $400 000. Straw holds other equity investments but does not prepare consolidated financial statements. Berry Limited revalued its plant downwards by $50 000 during the current financial period.

The balance of the investment in associate account at the end of the current financial period is:

Select one:

$400 000

$390 000

$410 000

$350 000

13Rights to variable returns from an investee include:

Select one:

returns from economies of scale

remuneration from provision of services

returns from denying or regulating access to a subsidiary's assets

all of the above

14 Manny Ltd acquired 100% of the share capital of Ralphio Ltd when the carrying value of Ralphio Ltd.'s plant and machinery was $200 000. The fair value of the plant on acquisition date was $270 000. The company tax rate was 30%. What is the amount of the business combination valuation reserve that must be recognised on consolidation?

Select one:

$21 000

$70 000

$270 000

$49 000

15A consolidation worksheet adjustment to eliminate the effect of interest revenue and interest expense relating to intragroup loans has which of the following tax effects?

Select one:

Increase in current tax liability

Decrease in deferred tax asset

Increase in deferred tax liability

No tax effect

16Which of the following statements is incorrect?

Select one:

Significant influence requires the investor to actually exercise its power over the investee

Significant influence requires the investor to have the power or capacity to participate in the investee's financial and operating policy decision

Significant influence does not require the investor to actually exercise its power over the investee

The assessment of the existence of significant influence requires judgement on the part of the accountants

17Which of the following is not one of the three elements of control according to AASB10/IFRS 10Consolidated Financial Statements?

Select one:

Exposure, or rights, to variable returns from involvement with the investee

Dominating the decision making of the investee

Power over the investee

The ability to use power over the investee to affect the amount of the investor's returns.

18The pre-acquisition entry is necessary to:

Select one:

avoid overstating the equity and net assets of the parent

avoid understating the equity and net assets of the group

record the 'Shares in subsidiary' account in the parent's records

avoid overstating the equity and net assets of the group

19 A parent entity sold a depreciable non-current asset to a subsidiary entity for $14 000. The asset originally cost $12 000 and at the date of sale accumulated depreciation was $2000.

The amount of the unrealised gain on sale to be eliminated is:

Select one:

$2 800

$2 000

8 000

$4 000

20For the purposes of equity accounting, it is presumed that the investor has significant influence over the other entity where the investor holds:

Select one:

between 5% and 10% of the voting power of the investee

100% of the voting power of the investee

20% or more of the voting power of the investee

75% or more of the voting power of the investee