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FR D Preparing consolidated financial statements

Written by Fahad Mirza (ACCA)

7 ACCA Financial Reporting questions with answers and explanations.

Printable worksheet with answer key

All questions with answers
  1. The parent issues 400,000 shares valued at $3.00 and pays $500,000 cash. NCI at fair value is $400,000 and the subsidiary's net assets at fair value are $1,900,000. What is goodwill?

    • 1 $200,000
    • 2 $1,700,000
    • 3 $500,000
    • 4 $300,000
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    Correct answer: $200,000

    Consideration $1,700,000 + NCI $400,000 - net assets $1,900,000.

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  2. A subsidiary sold goods costing $40,000 to the parent for $60,000, and half are still held. What is the unrealised profit?

    • 1 $10,000
    • 2 $20,000
    • 3 $5,000
    • 4 $30,000
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    Correct answer: $10,000

    Profit of $20,000 x 50%.

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  3. A subsidiary sold goods costing $40,000 to the parent for $60,000, and half are still held. The NCI owns 20 percent of the subsidiary. How much of the unrealised profit adjustment is borne by the NCI?

    • 1 $0
    • 2 $10,000
    • 3 $8,000
    • 4 $2,000
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    Correct answer: $2,000

    The subsidiary was the seller, so the NCI bears 20% x $10,000.

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  4. A 25 percent associate was bought for $600,000 and has made post-acquisition profit of $200,000. What is the carrying amount of the investment under the equity method?

    • 1 $600,000
    • 2 $650,000
    • 3 $550,000
    • 4 $800,000
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    Correct answer: $650,000

    600,000 + 25% x 200,000 = 650,000.

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  5. How is a subsidiary acquired part way through the year treated in the consolidated statement of profit or loss?

    • 1 Only its results after the acquisition date are included
    • 2 The full year is included
    • 3 None of its results are included
    • 4 Only its results before acquisition are included
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    Correct answer: Only its results after the acquisition date are included

    Control starts at the acquisition date.

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  6. Which fair value is used in the calculation of goodwill?

    • 1 The value at the reporting date
    • 2 The nominal value of the shares issued
    • 3 The fair value of the consideration and of the subsidiary's identifiable net assets at acquisition
    • 4 The book value of the subsidiary
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    Correct answer: The fair value of the consideration and of the subsidiary's identifiable net assets at acquisition

    Fair values give a fair measure of what was acquired.

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  7. What is non-controlling interest?

    • 1 The part of the parent not owned by the public
    • 2 The part of a subsidiary's equity not owned by the parent
    • 3 A form of goodwill
    • 4 A loan from the parent
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    Correct answer: The part of a subsidiary's equity not owned by the parent

    It is shown within equity in the consolidated statement of financial position.

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