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FR D Preparing consolidated financial statements

Written by Fahad Mirza (ACCA)

ACCA · Financial Reporting · 7 questions

Name: ____________________   Date: ____________

  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?

    • A $200,000
    • B $1,700,000
    • C $500,000
    • D $300,000

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

    • A $10,000
    • B $20,000
    • C $5,000
    • D $30,000

  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?

    • A $0
    • B $10,000
    • C $8,000
    • D $2,000

  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?

    • A $600,000
    • B $650,000
    • C $550,000
    • D $800,000

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

    • A Only its results after the acquisition date are included
    • B The full year is included
    • C None of its results are included
    • D Only its results before acquisition are included

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

    • A The value at the reporting date
    • B The nominal value of the shares issued
    • C The fair value of the consideration and of the subsidiary's identifiable net assets at acquisition
    • D The book value of the subsidiary

  7. What is non-controlling interest?

    • A The part of the parent not owned by the public
    • B The part of a subsidiary's equity not owned by the parent
    • C A form of goodwill
    • D A loan from the parent

Answer key

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

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

  2. Profit of $20,000 x 50%.

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

  4. 600,000 + 25% x 200,000 = 650,000.

  5. Control starts at the acquisition date.

  6. Fair values give a fair measure of what was acquired.

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