Q 27.1: Before undertaking the consolidation process, it may be necessary to make the following adjustments in relation to the individual statements if the end of the subsidiary's financial period does no’ coincide with the: yv (A) the subsidiary will prepare its own financial statements as at the end of the parent's financial period. x eo the subsidiary will prepare its own financial statements as at 30 June if the end of the parent's reporting period is not 30 June. ¢)_ the parent will prepare its own financial statements as at 30 June if the end of the parent's reporting period is not 30 June. D)_ the parent will prepare its own financial statements as at the end of the subsidiary's financial period.Q 27.2: On 1 January 2018, Badger Ltd acquired all the issued shares in Hedgehog Ltd. At that date, the inventory of Hedgehog Ltd had a fair value of $10 000 more than its carrying amount. By 30 June 2019, 75% of the inventory was sold to an entity outside of the group. The business combination valuation consolidation adjustment for inventories as at 30 June 2019 will include: A) a credit to inventories of $2 500 and a credit to cost of sales of $7 500. B) a debit to inventories of $7 500 and a debit to cost of sales $2 500. % © 2 debitto inventories of $10 000. v (D) a debit to inventories of $2 500 and a debit to cost of sales of $7 500.Q 27.3: Which of the following statements is incorrect? A) Pre-acquisition entries prepared after acquisition date are adjusted for the changes in the investment account recognised by the parent in the subsidiary. x oe Pre-acquisition entries prepared after acquisition date include the pre-acquisition entry prepared at acquisition date adjusted for the effects of all the transfers between pre- acquisition equity accounts and changes in the investment account up to the beginning of the current period. v (C) Pre-acquisition entries prepared after acquisition date are adjusted for transfers between post-acquisition equity accounts. D) Pre-acquisition entries prepared after acquisition date reverse the transfers between pre- acquisition equity accounts and changes in the investment account that happen in the current period.Q 27.4: At the end of any period after acquisition, the business combination entries prepared for the assets and liabilities that were not recorded at fair value at acquisition date and that are sold, fully depreciated or settled during the current period include: v (A) adjustments to the gains on sale or to expenses generated by depreciation, amortisation o1 impairment losses or settlement of liabilities, recognising also the tax effects. x oe no adjustments are required. adjustments to the asset or liability account, recognising also the tax effects. D) adjustments to the asset and liability account and to the gains on sale or to expenses generated by depreciation, amortisation or impairment losses or settlement of liabilities, recognising also the tax effects.Q 27.5: Which of the following assets cannot be revalued above their cost in the accounting records of the subsidiary? A) Inventories x@ Plant and equipment v (©) Inventories and goodwill D) GoodwillQ 27.6: Which of the following statements is incorrect? A) |f the assets can be revalued in the subsidiary accounts, the increase in value will be recognised as part of the pre-acquisition equity in asset revaluation surplus. B) /f the assets are revalued in the consolidation worksheet, the increase in value will be recognised as part of the pre-acquisition equity in the business combination valuation reserve. x eo The fair value adjustments may be made via the consolidation worksheet or in the actual records of the subsidiary. v (D) Allassets can be revalued in the subsidiary's accounts.Q 27.7: According to AASB 3 Business Combinations, the key principle relating to the disclosure of information about business combinations is to disclose information that: ‘A) provides financial statement users with information about the parent entity only. B) enables the preparation of the consolidated financial statements in the most cost-effective manner. * e does not give an advantage to the competitors of a consolidated group. v (D) enables financial statement users to evaluate the nature and financial effect of business combinations that occurred during the reporting period.Q 27.8: If a subsidiary's reporting date does not coincide with the parent entity's reporting date, adjustments must be made for the effects of significant transactions that occur between the two reporting dates provided the reporting dates differ by no more than: ‘A) six months. % © one month. ©) nine months. v (D) three months.Q 27.9: The consolidation worksheet entries have an impact on: A) the individual statement of the parent. v (B) the consolidated financial statements C) the individual statements of the parent and its subsidiaries. % © the individual statement of the subsidiaries.Q 27.10: Harry Limited has two subsidiary entities, Ron Limited and Hermione Limited. Harry Limited owns 100% of the shares in both entities. Details of the cash accounts of each company are: Harry Limited $150 000, Ron Limited $40 000, Hermione Limited $20 000. The balance of the consolidated cash account of the Harry Limited group is: *x@ 3170000. v(B) $210000. ©) $200 000. D) 3190000.Q 27.11: Which of the following statements is incorrect? A v(D) The acquisition analysis will determine whether any goodwill or gain on bargain purchase has arisen as a part of the business combination. An acquisition analysis is prepared at acquisition date to identify the identifiable assets and liabilities of the subsidiary at fair value. The acquisition analysis may include the recognition of assets and liabilities not recognised in the subsidiary's records. The business combination valuation reserve is an account recorded in the subsidiary’s records.Q 27.12: The acquisition analysis calculates the fair value of the net identifiable assets and liabilities acquired based on the book value of the pre-acquisition equity of the subsidiary, adjusted for the following: ‘A) previously recorded goodwill in the subsidiary at acquisition date. B) fair value adjustments for the assets and liabilities that were recorded in the subsidiary’s accounts at acquisition date based on carrying amounts different from fair value. % @ the fair value of the assets and liabilities not recorded in the subsidiary’s accounts at acquisition date. v (D) allofthe options are correct.Q 27.13: At the date of acquisition, a subsidiary had recorded a dividend payable of $80 000. Assuming that the shares were acquired on a cum div. basis, the consolidation adjustment needed at the date of acquisition to eliminate the dividend is: A) Dr Shares in subsidiary $80 000; Cr Dividend receivable $80 000 Pi o Dr Dividend payable $80 000; Cr Dividend receivable $80 000 C) Dr Dividend receivable $80 000; Cr Dividend payable $80 000 D) Dr Dividend revenue $80 000; Cr Dividend declared $80 000Q 27.14: 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: A) an increase in the ‘Shares in subsidiary’ asset. B) goodwill. % © 2 transfer to the business combination valuation reserve v (D) again on bargain purchase.Q 27.15: Why is there is no recognition of a deferred tax item in respect to goodwill? because it is a residual amount and the recognition of a deferred tax item would A) !tisa residual amount and the recognition of a deferred tax item would decrease the profit on consolidation. x oO It is a residual amount and the recognition of a deferred tax item would increase the profit on consolidation. v (€) It isa residual amount and the recognition of a deferred tax item would increase the carrying amount of goodwill. D) It isa residual amount and the recognition of a deferred tax item would decrease the carrying amount of goodwill.