Question 1

question 1

Question text

The pre-acquisition entry is necessary to:

Select one:

a. avoid overstating the equity and net assets of the group.

b. avoid understating the equity and net assets of the group.

c. avoid overstating the equity and net assets of the parent.

d. record the 'shares in subsidiary' account in the parent's records.

Question 2

Question text

Papa Limited has two subsidiary entities, Mumma Limited and Junior Limited. Papa Limited owns 100% of the shares in both entities. Details of the cash accounts of each company are: Papa Limited $320 000, Mumma Limited $170 000, Junior Limited $25 000. The balance of the consolidated cash account of the Papa Limited group is:

Select one:

a. $195 000

b. $320 000

c. $515 000

d. $125 000

Question 3

Question text

Forrest Ltd acquired 100% of the share capital of Desert Ltd when the carrying value of Desert Ltd's equipment was $75000. The fair value of the equipment on acquisition date was $90000. The company tax rate was 30%. What is the amount of the business combination valuation reserve that must be recognised on consolidation?

Select one:

a. $15 000

b. $10 500

c. $3 500

d. $90 000

Question 4

Question text

Prince Limited acquired 100% of the share capital of Charming Limited for a purchase consideration of $380 000. At acquisition date, the net fair value of Charming Limited's assets, liabilities and contingent liabilities was $350 000 including goodwill with a carrying amount of $10 000. The company tax rate is 30%. The unrecorded amount of goodwill that must be recognised on the consolidation worksheet is:

Select one:

a. $10 000.

b. $20 000.

c. $30 000.

d. $40 000.

Question 5

Question text

Where the consideration transferred is less than the fair value of the identifiable net assets and contingent liabilities acquired, the difference must be recognised in the consolidation worksheet as:

Select one:

a. a transfer to the business combination valuation reserve.

b. a gain on bargain purchase.

c. goodwill.

d. an increase in the 'Shares in subsidiary' asset.

Question 6

Question text

When a subsidiary declares a final dividend payable to a parent who has a 100% interest in the subsidiary, the parent recognises a dividend receivable and the subsidiary recognises a dividend payable. In addition to the elimination of these two items on consolidation, the following items must also be eliminated:

Select one:

a. Dividend revenue and Cash.

b. Dividend declared and Cash.

c. Dividend declared and Dividend revenue.

d. Dividend declared and Retained earnings.

Question 7

Question text

A subsidiary sold inventories to its parent entity in the year ended 30 June 2019 at a profit of $8 000. At 30 June 2019 the parent had not sold the inventories. The company tax rate is 30%. The consolidation worksheet prepared at 30 June 2019 will contain the following adjustment entry for inventories:

Select one:

a. CR Inventories $2 400.

b. DR Inventories $2 400.

c. DR Inventories $8000.

d. CR Inventories $8000.