 Inventory

 Question 1
1 out of 1 points
Cockroaches Limited acquired the identifiable assets, liabilities and
contingent liabilities of Inglis Limited for $268 000. The items acquired, stated
at fair value, are: plant $144 000; inventory $80 000; accounts receivable
$36 000; patents $20 000; and accounts payable $32 000. The difference on
acquisition is:

Selected Answer:
goodwill of $20 000.
Answers: gain on bargain purchase $20 000.
gain on bargain purchase $32 000.

goodwill of $20 000.

goodwill of $248 000.
 Question 2
0 out of 1 points
Suncorp Limited acquired a 15% interest in Milton Pty Ltd on 1 January
2014. On 15 September 2014 it acquired an additional 25% interest, and on
15 March 2015 a further 15%. Under AASB 3/IFRS 3, a business
combination occurs on:

Selected Answer:
1 January 2014.
Answers: 1 January 2014.
15 September 2014.

15 March 2015.
all of the above.
 Question 3
1 out of 1 points
 The date on which the acquirer obtains control of the acquiree is referred to
as the:

Selected Answer:
acquisition date.
Answers: business combination date.

acquisition date.
control date.
purchase date.
 Question 4
0 out of 1 points
Which of the following is not one of the factors in AASB 3/IFRS 3 Business
Combinations that guide the identification of the acquirer where 2 companies
combine to form a new company?

Selected
Answer: The entity that has a significantly greater fair value.
Answers:
The entity that has the smaller fair value.
The entity that has a significantly greater fair value.
The entity whose management is able to dominate the
business combination.
The entity that gives up the cash or other assets where
equity instruments are exchanged for cash or other assets.
 Question 5
0 out of 1 points
A subsidiary is an entity that:

Selected Answer:
has significant influence over a parent entity.
Answers: has significant influence over a parent entity.
exercises control over a parent entity.
has the power to control a parent entity.
 is controlled by another entity.

 Question 6
0 out of 1 points
When deciding whether or not one entity controls another entity:

Selected
Answer: the controlling entity must have exercised its power to
control.
Answers: the controlling entity must have exercised its power to
control.

it is sufficient that the controlling entity has the capacity to

control.
the controlling entity must be actively involved in the
decision making of the other entity.
the controlling entity must have exerted its control over the
financing policies of the other entity.
 Question 7
0 out of 1 points
Which of the following statements is correct?

Selected
Answer: The legal acquirer is determined under AASB 3/IFRS 3 as the
entity that issues the equity instruments.
Answers: The legal acquirer under AASB 3/IFRS 3 and the accounting
acquirer under AASB 10/IFRS 10 do not have to be the same
entity.
The entity identified under AASB 10/IFRS 10 as the parent
will be the acquirer under AASB 3/IFRS 3.
The legal acquirer is determined under AASB 3/IFRS 3 as the
 entity that issues the equity instruments.

The accounting acquirer is the entity that becomes the

controlling entity.
 Question 8
1 out of 1 points
On 1 January 2017, Cowboys Ltd acquired all the issued shares in Tate Ltd.
At that date, the inventory of Tate Ltd had a fair value of $10 000 more than
its carrying amount. By 30 June 2018, 75% of the inventory was sold to an
entity outside of the group. The business combination valuation
consolidation adjustment against inventory in relation to the transaction as at
30 June 2018 will be:

Selected Answer:
a debit of $2500.
Answers: a debit of $7500.
a credit of $5000.
a debit of $5000.

a debit of $2500.
 Question 9
0 out of 1 points
Which of the following assets cannot be revalued above their cost in the
accounting records of the subsidiary?

Selected Answer:
Goodwill
Answers: Inventory
Plant and equipment
Goodwill

Both a and c
 Question 10
1 out of 1 points
 When Wayne Ltd acquired 100% of the share capital of Carol Ltd, the
carrying amount of Carol Ltd’s machinery was $200 000. The fair value of the
machinery on acquisition date was $160 000. The company tax rate was
30%. What is the amount of the business combination valuation reserve that
will be recognised on consolidation?

Selected Answer:
$28 000
Answers: $40 000
$12 000

$28 000
$160 000
 Question 1
1 out of 1 points
A business combination is defined in AASB 3/IFRS 3 as a transaction:

Selected
Answer: or other event in which an acquirer obtains control of one
or more businesses.
Answers: in which an acquiree obtains control of one or more
businesses.
in which one entity obtains significant influence over one or
more other entities.

or other event in which an acquirer obtains control of one

or more businesses.
or other event in which an entity obtains control of one or
more businesses.
 Question 2
1 out of 1 points
Goodwill arising in a business combination is classified as a/an:

Selected Answer:
 asset.
Answers: item in equity.

asset.
liability.
expense associated with the acquisition.
 Question 3
0 out of 1 points
The price that would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants at measurement date
is defined in AASB 3/IFRS 3 Business Combinations as the:

Selected Answer:
market value.
Answers: market value.

fair value.
present value.
current replacement
cost.

 Question 4
1 out of 1 points
Susan Limited has two subsidiary entities, Rachel Limited and Rebecca
Limited. Susan Limited owns 100% of the shares in both entities. Details of
the cash accounts of each company are: Susan Limited $200 000, Rachel
Limited $60 000, Rebecca Limited $30 000. The balance of the consolidated
cash account of the Susan Limited group is:

Selected Answer:
$290 000.
Answers:
$290 000.
 $200 000.
$260 000.
$230 000.

 Question 5
0 out of 1 points
At the date of acquisition, a subsidiary had recorded a dividend payable of
$100 000. 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:

Selected
Answer: DR Dividend receivable $100 000
CR Dividend
payable $100 000
Answers:
DR Dividend payable $100 000
CR Dividend
receivable $100 000
DR Dividend revenue $100 000
CR Dividend
declared $100 000
DR Shares in subsidiary $100 000
CR Dividend
receivable $100 000
DR Dividend receivable $100 000
CR Dividend
payable $100 000
 Question 6
0 out of 1 points
Which of the following statements is incorrect?

Selected
 Answer: Where consolidated financial statements are prepared over a
number of years, consolidation entries need to be made every
time a consolidation worksheet is prepared.
Answers: Where consolidated financial statements are prepared over a
number of years, consolidation entries need to be made every
time a consolidation worksheet is prepared.

Consolidation adjusting entries affect the ledger accounts of

the parent and subsidiaries.
A consolidation worksheet is used to help the process of
adding together the financial statements of the parent and its
subsidiaries.
There are no consolidated ledger accounts.
 Question 7
1 out of 1 points

A group of entities comprised of Kerri Limited (parent entity), Georgia

Limited (subsidiary entity) and Emily Limited (subsidiary entity)
have the following inventory balances.

- Kerri Limited $41 000

- Georgia Limited $14 000
- Emily Limited $12 000
Which of the following amounts is shown as the consolidated inventory
balance in the consolidated financial statements?
Selected Answer:
$67 000
Answers: $12 000
$14 000
$26 000

$67 000
 Question 8
 1 out of 1 points
When one entity controls another entity, the business combination results in
which of the following types of relationship?

Selected Answer:
Parent–subsidiary
Answers:
Parent–subsidiary
Investor–investee
Investor–associate
Parent–child

 Question 9
0 out of 1 points
Juliet Ltd is a listed public company and has a 60% controlling interest in
Marley Pty Ltd. Marley Pty Ltd is the parent of Butterscotch Pty Ltd. In
which of the following situations will Marley Pty Ltd not be required to
prepare consolidated financial statements?

Selected
Answer: Where it is likely that there are external users dependant on
the information.
Answers: If Marley Pty Ltd prepares separate financial statements that
comply with IFRS.

If the other owners of Marley Pty Ltd have consented to the

non-preparation of consolidated financial statements.
Where it is likely that there are external users dependant on
the information.
Marley Pty Ltd would never be required to prepare
consolidated financial statements.
 Question 10
1 out of 1 points
Kowloon Limited is an entity listed in Hong Kong. Kowloon Limited holds a
100% investment in Aussie Pty Ltd, an Australian based company, who in
turn holds a 90% interest in Skippy Pty Ltd. Aussie Pty Ltd and the Aussie
group (comprising Aussie and Skippy) are both non-reporting

. Which of the following statements is correct?

Selected
Answer: Aussie Pty Ltd will not be required to prepare consolidated
financial statements as they are a non-reporting entity.
Answers: Aussie Pty Ltd will be required to prepare consolidated
financial statements as the ultimate Australian parent.

Aussie Pty Ltd will not be required to prepare consolidated

financial statements as they are a non-reporting entity.
Aussie Pty Ltd will be required to prepare consolidated
financial statements only if directed to do so by ASIC.
Aussie Pty Ltd will not be required to prepare consolidated
financial statements as Kowloon is a listed foreign entity.
 Question 1
0 out of 1 points
AASB 10/IFRS 10 Consolidated Financial Statements defines a ‘parent’ and
a ‘subsidiary’ as which of the following?

Selected
Answer: Parent, an entity that has one or more subsidiaries.
Subsidiary, an entity which is controlled by a parent entity.
Answers: Parent, an entity which is controlled by another entity.
Subsidiary, an entity that controls one or more entities.
Parent, an entity which owns more than 20% of the voting
shares of another entity.
Subsidiary, an entity which is owned by another entity.
Parent, an entity that has one or more subsidiaries.
Subsidiary, an entity which is controlled by a parent entity.

Parent, an entity that controls one or more entities.

Subsidiary, an entity that is controlled by another entity.

 Question 2
0 out of 1 points
 Two entities A Limited and B Limited together form a third entity, C Limited.
C Limited acquires A Limited and B Limited. In this situation, AASB 3/IFRS
3 Business Combinations, adjudges that:

Selected
Answer: the combined A Limited and B Limited, is the acquirer of C
Limited.
Answers: A Limited and B Limited cease to exist and C Limited is
the acquirer.
the combined A Limited and B Limited, is the acquirer of C
Limited.
C Limited is considered to be the acquirer.

C Limited is not to be considered to be the acquirer.

 Question 3
1 out of 1 points

The equity in a subsidiary not attributable to a parent is known as a/an:

Selected Answer:
non-controlling
interest.
Answers:
non-controlling
interest.
attributable interest.
non-parent interest.
external interest.
 Question 4
1 out of 1 points
At balance date, Company A has 40% of the voting rights in Company B. In
addition Company A holds potential voting rights in Company B amounting to
6% that are currently exercisable, and a further 9% of voting rights in
Company B that can be exercised in two years’ time. Which of the following
 statements is correct?

Selected
Answer: Consolidated financial statements need not be prepared for
Company A and B for the current year.
Answers: Consolidated financial statements must be prepared for
Company A and B in the current year.

Consolidated financial statements need not be prepared for

Company A and B for the current year.
Consolidated financial statements must be prepared as
Company A controls Company B at balance date.
Consolidated financial statements must be prepared as
Company A has more than half of the voting rights in
Company B at balance date.
 Question 5
1 out of 1 points
Cockroaches Limited acquired the identifiable assets, liabilities and
contingent liabilities of Inglis Limited for $268 000. The items acquired, stated
at fair value, are: plant $144 000; inventory $80 000; accounts receivable
$36 000; patents $20 000; and accounts payable $32 000. The difference on
acquisition is:

Selected Answer:
goodwill of $20 000.
Answers: gain on bargain purchase $20 000.
gain on bargain purchase $32 000.

goodwill of $20 000.

goodwill of $248 000.
 Question 6
0 out of 1 points
Maroons Limited acquired the net assets and contingent liabilities of Lewis
Limited for $60 000. Lewis Limited's net assets and contingent liabilities
 were: total assets $84 000; total liabilities $10 000; and contingent liabilities
$12 000. Maroons Limited will record a:

Selected Answer:
goodwill of $2000.
Answers: goodwill of $2000.

gain on bargain purchase of $2000.

goodwill of $14 000.
gain on bargain purchase of $60 000.
 Question 7
1 out of 1 points
When an acquiree liquidates, the accounts of the acquiree are transferred to
which two accounts?

Selected Answer:
Liquidation and shareholders’ distribution
Answers: Share capital and retained earnings

Liquidation and shareholders’ distribution

Cash at bank and liquidation
Shareholders’ distribution and retained earnings
 Question 8
0 out of 1 points
On 1 January 2017, Cowboys Ltd acquired all the issued shares in Tate Ltd.
At that date, the inventory of Tate Ltd had a fair value of $10 000 more than
its carrying amount. By 30 June 2018, 75% of the inventory was sold to an
entity outside of the group. The business combination valuation
consolidation adjustment against inventory in relation to the transaction as at
30 June 2018 will be:

Selected Answer:
a debit of $7500.
Answers: a debit of $7500.
 a credit of $5000.
a debit of $5000.

a debit of $2500.
 Question 9
1 out of 1 points
Susan Limited has two subsidiary entities, Rachel Limited and Rebecca
Limited. Susan Limited owns 100% of the shares in both entities. Details of
the cash accounts of each company are: Susan Limited $200 000, Rachel
Limited $60 000, Rebecca Limited $30 000. The balance of the consolidated
cash account of the Susan Limited group is:

Selected Answer:
$290 000.
Answers:
$290 000.
$200 000.
$260 000.
$230 000.

 Question 10
0 out of 1 points
Which of the following statements is correct?

Selected
Answer: AASB 3/IFRS 3 Business Combinations requires that any
revaluations of a subsidiary’s assets at acquisition date must
be done in the consolidation worksheet.
Answers: AASB 3/IFRS 3 Business Combinations requires that any
revaluations of a subsidiary’s assets at acquisition date must
be done in the consolidation worksheet.
The revaluation of non-current assets in the subsidiary’s
records means that the subsidiary has adopted the cost
 model of accounting for those assets.

Revaluations of assets such as goodwill and inventory are not

permitted in the accounting records of the subsidiary.
Inventory can be revalued to an amount greater than its cost
in the records of the subsidiary.
 Question 1
1 out of 1 points
Susan Limited has two subsidiary entities, Rachel Limited and Rebecca Limited.
Susan Limited owns 100% of the shares in both entities. Details of the cash
accounts of each company are: Susan Limited $200 000, Rachel Limited $60
000, Rebecca Limited $30 000. The balance of the consolidated cash account of
the Susan Limited group is:

Selected
Answer: $290
000.
Answers:
$290
000.
$200
000.
$260
000.
$230
000.

 Question 2
0 out of 1 points
Which of the following assets cannot be revalued above their cost in the
accounting records of the subsidiary?

Selected
Answer: Goodwill
Answers: Inventory
Plant and
equipment
Goodwill

Both a and c
 Question 3
0 out of 1 points
 Where the consideration transferred is less than the fair value of the identifiable
net assets and contingent liabilities acquired, the item must be recognised in the
consolidation worksheet as:

Selected
Answer: goodwill.
Answers: a transfer to the business combination
valuation reserve.
goodwill.
an increase in the ‘Shares in subsidiary’ asset.

a gain on bargain purchase.

 Question 4
0 out of 1 points
According to the Conceptual Framework, recognition of an asset occurs if it is
probable that future economic benefits will flow to the entity and:

Selected
Answer: it is a non-current asset.
Answers:
it has a value that can be measured with
reliability.
it is a non-current asset.
it has a value that can be measured with
certainty.
it is a current asset.
 Question 5
1 out of 1 points
Ying Limited acquires the net assets of Yang Limited for a cash consideration of
$50 000. One half is to be paid on acquisition date and one half is payable in one
year’s time. The appropriate discount rate is 5% p.a. The present value of the
cash outflow in one year’s time is:

Selected
Answer: $23
810.
Answers:
$23
810.
$25 00
0.
$26
190.
$30 00
0.
 Question 6
 1 out of 1 points
According to Johnson and Petrone (1998), which of the following is not a
component of goodwill?

Selected
Answer: Excess of the book values over the fair values of the acquiree’s
recognised assets.
Answers: Overpayment by the acquirer.
Overvaluation of the consideration paid by the acquirer.

Excess of the book values over the fair values of the acquiree’s
recognised assets.
Excess of the fair values over the book values of the acquiree’s
recognised assets.
 Question 7
0 out of 1 points

The entity that is represented by a single set of

consolidated financial statements is:

Selected
Answer: a consolidated
entity.
Answers:
an economic
entity.
a parent entity.
a subsidiary
entity.
a consolidated
entity.
 Question 8
1 out of 1 points
Where a non-controlling interest exists in a subsidiary, AASB 12 /IFRS
12 Disclosure of Interests in Other Parties
requires parent entities to disclose which of the following for each such
subsidiary?
I Summarised financial information about each subsidiary.
II The proportion of ownership interests held by non-controlling interests.
III If the subsidiary is not wholly owned, the names of all other members.
IV The country of incorporation of subsidiaries.
Selected
Answer: I, II and IV
only
Answers:
I, II and IV
only
 II, III and IV
only
I and IV only
I, II, III and IV
 Question 9
0 out of 1 points
Which of the following is not one of the three elements of control according to
AASB 10/IFRS 10 Consolidated Financial Statements?

Selected
Answer: Power over the investee.
Answers: The ability to use power over the investee to affect the amount
of the investor’s returns.

Dominating the decision making of the investee.

Power over the investee.
Exposure, or rights, to variable returns from involvement with the
investee.
 Question 10
1 out of 1 points
At balance date, Company A has 40% of the voting rights in Company B. In
addition Company A holds potential voting rights in Company B amounting to 6%
that are currently exercisable, and a further 9% of voting rights in Company B
that can be exercised in two years’ time. Which of the following statements is
correct?

Selected
Answer: Consolidated financial statements need not be prepared for
Company A and B for the current year.
Answers: Consolidated financial statements must be prepared for Company
A and B in the current year.

Consolidated financial statements need not be prepared for

Company A and B for the current year.
Consolidated financial statements must be prepared as Company A
controls Company B at balance date.
Consolidated financial statements must be prepared as Company A
has more than half of the voting rights in Company B at balance
date.