H Preparing basic consolidated financial statements

Written by Fahad Mirza (ACCA)

ACCA · Financial Accounting · 8 questions

Name: ____________________ Date: ____________

P owns 60 percent of the voting shares of S and has the power to direct its activities. How is S treated in P's group accounts?
- A It is not shown
- B As an associate, using the equity method
- C As a trade investment at cost
- D As a subsidiary, consolidated line by line
P paid $500,000 for 80 percent of S. The fair value of the non-controlling interest was $120,000 and the fair value of S's net assets at acquisition was $560,000. What is goodwill?
- A $20,000
- B $180,000
- C $380,000
- D $60,000
The non-controlling interest in S was valued at $90,000 at acquisition. S has made $40,000 of profit since acquisition and the NCI owns 25 percent. What is the NCI at the reporting date?
- A $10,000
- B $130,000
- C $100,000
- D $90,000
P sold goods costing $600 to S for $900. Half are still held by S at the year end. What is the unrealised profit to remove?
- A $300
- B $75
- C $150
- D $450
How are intra-group receivables and payables dealt with in the consolidated statement of financial position?
- A They are shown in non-controlling interests
- B They are added together
- C They are shown as goodwill
- D They are eliminated
An investor owns 30 percent of the voting shares of an investee and has significant influence. How is the investment accounted for?
- A Using the equity method
- B At cost only
- C By consolidating line by line
- D It is not recognised
P has revenue of $1,000 and S has revenue of $400. During the year P sold goods to S for $100. What is consolidated revenue?
- A $1,400
- B $1,300
- C $1,200
- D $1,500
S was acquired part way through the year. How is S's profit for the year included in the consolidated statement of profit or loss?
- A Only the profit earned after the acquisition date is included
- B The full year's profit is included
- C None of the profit is included
- D Only the profit before acquisition is included

Answer key

1. D, 2. D, 3. C, 4. C, 5. D, 6. A, 7. B, 8. A

Control makes S a subsidiary, so 100 percent of its assets and liabilities are consolidated.
Goodwill = 500 + 120 - 560 = $60k.
NCI = 90,000 + 25 percent x 40,000 = $100,000.
Profit = $300. Half remains unsold in the group, so $150 is unrealised.
The group cannot owe itself money.
An associate is accounted for under the equity method.
Intra-group sales are removed: 1,000 + 400 - 100 = 1,300.
The group controls S only from the acquisition date.