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Accountancy Department
Advanced Financial Accounting and Reporting 2
9. It is that portion of the profit or loss and net assets of a subsidiary attributable to equity interest that are not owned directly or
indirectly through subsidiaries by the parent.
a. Subsidiary interest c. Non-controlling interest
b. Residual interest d. Controlling interest
11. Which of the following terms best describes the financial statements of a parent in which the investments are accounted for on
the basis of the direct equity interest?
a. Separate financial statements c. Consolidated financial statements
b. Single financial statements d. Combined financial statements
12. An entity acquired an investment in a subsidiary with the view to dispose of this investment within six months. The investment
in the subsidiary has been classified as held for sale and is to be accounted for in accordance with PFRS 5. The subsidiary has
never been consolidated. How should the investment in the subsidiary be treated in the financial statements?
a. The subsidiary should not be consolidated but PFRS 5 should be used.
b. Equity accounting should be used.
c. The subsidiary should remain off balance sheet.
d. Purchase accounting should be used.
13. X owns 50% of Y's voting shares. The board of directors consists of 6 members. X appoints three of them and Y appoints the
other three. The casting vote at meetings always lies with the directors appointed by X. Does X have control over Y?
a. No, X owns only 50% of the entity's shares and therefore does not have control.
b. No, control is equally split between X and Y.
c. Yes, X holds 50% of the voting power and has the casting vote at board meetings in the event there
is no majority decision.
d. No, control can be exercised only through voting power, not through a casting vote.
14. A subsidiary, acquired for cash in a business combination, owned inventories with a market value greater than the book value
as of the date of combination. A consolidated balance sheet prepared immediately after the acquisition would include this
difference as part of
a. Deferred credits c. Retained earnings
b. Goodwill d. Inventories
15. When a parent-subsidiary relationship exists, consolidated financial statements are prepared in recognition of the accounting
concept of
a. Reliability c. Legal entity
b. Materiality d. Economic entity
16. Are the following statements TRUE or FALSE, according to IAS 27 consolidated an Separate Financial Statements.
Statement I: Consolidated financial statements must be prepared using uniform accounting policies,
Statement II: The non-controlling interest in the net assets of subsidiaries may be shown by way of note to the
consolidated statement of financial position
Statement I Statement II
a. False False c. True True
b. False True d. True False
18. In the consolidated balance sheet prepared immediately after the acquisition, the consolidated total assets should amount to:
a. 2,910,000 c. 2,480,000
b. 2,430,000 d. 2,370,000
19. In the consolidated balance sheet prepared immediately after the acquisition, the consolidated stockholders' equity should
amount to:
a. 1,330,000 c. 1,280,000
b. 1,630,000 d. 1,250,000
20. How much is the goodwill in the consolidated balance sheet prepared immediately after the acquisition?
a. 30,000 c. 60,000
b. 40,000 d. None of these
21. In the consolidated balance sheet prepared immediately after the acquisition, the consolidated stockholders’ equity should
amount to:
a. 1,250,000 c. 1,650,000
b. 1,600,000 d. 1,680,000
The statements of financial position of the entities on December 31, 20x1 are as follows:
Square Co. Circle Co.
ASSETS
Cash..............................................................................................392,000...............316,000
Inventory......................................................................................420,000.................60,000
Investment in subsidiary (at cost)................................................300,000
Equipment, net.............................................................................560,000...............120,000
TOTAL ASSETS.......................................................................1,872,000...............496,090
22. How much is the consolidated retained earnings on December 31, 20x1?
a. 392,000 c. 472,000
b. 378,000 d. 522,000
23. How much is the consolidated total equity as of December 31, 20x1?
a. 1,412,000 c. 1,492,000
b. 1,415,000 d. 1,380,000
25. How much is the consolidated profit attributable to owners of the parent in 20x1?
a. 437,800 c. 381,800
b. 396,800 d. 448,800
26. Baiter Inc. acquired Jersey Company on January 1,2011. When the purchase occurred Jersey Company had the following
information related to fixed assets:
Land............................................................................................P 80,000
Building........................................................................................200,000
Accumulated Depreciation........................................................(100,000)
Equipment....................................................................................100,000
Accumulated Depreciation..........................................................(50,000)
The building has a 10-year remaining useful life and the equipment has a 5-year remaining useful life. The fair values of the
assets on that date were:
Land...........................................................................................P100,000
Building........................................................................................130,000
Equipment......................................................................................75,000
What is the 2011 depreciation expense Baiter will record related to purchasing Jersey Company?
a. P30,000 c. P15,000
b. P 8,000 d. P28,000
27. The Lampara Company acquired a 70% interest in The Oak Company for P1,960,000 when the fair value of Oak's identifiable
assets and liabilities was P700,000 and elected to measure the non-controlling interest at its share of the identifiable net assets.
Annual impairment reviews of goodwill have not resulted in any impairment losses being recognized. Oak's current statement
of financial position shows share capital of P100,000, a revaluation reserve of P300,000 and retained earnings of P1,400,000.
Under PFRS 3 Business combinations, what figure in respect of goodwill should now be carried in Lampara's consolidated
statement of financial position?
a. P160,000 c. P1,260,000
b. P700,000 d. P1,470,000
28. Pluro Company purchases 8,000 shares of Sun Company for P64 per share. Before acquisition, Sun Company has the
following balance sheet:
Assets Liabilities and Equity
Cash and cash equivalents............P20,000 Current liabilities.........................P250,000
Inventory......................................280,000 Common stock, P5 par....................50,000
Property and equipment...............400,000 APIC..............................................130,000
Goodwill.......................................100,000 Retained earnings..........................370,000
Total assets..................................P800,000 Total liabilities and equity...........P800,000
On the date of acquisition, Pluto believes that the inventory has a fair value of P400,000 and that the property and equipment
is worth P500,000.
On the date of acquisition, what is the goodwill (gain on acquisition) to be reported on the consolidated statements?
a. P(24,000) c. P 30,000
b. P 24,000 d. P(30,000)
29. On January 1, 2011, Ritt Corp. purchased 80% of Shaw Corp.'s P10 par common stock for P975,000. On this date, the
carrying amount of Shaw's net assets was P1,000,000. The fair values of Shaw's identifiable assets and liabilities were the
same as their carrying amounts except for plant assets (net) with fair values of P100,000 in excess of their carrying amount.
The fair value of the non-controlling interest in Shaw on January 1, 2011, was P250,000. For the year ended December 31,
2011, Shaw had net income of P190,000 and paid cash dividends totaling P125,000. In the December 31, 2011 consolidated
statement of financial position, non-controlling interest should be reported at
a. P233.000 c. P213,000
b. P263,000 d. P200,000
30. Bacolod Company acquired 55% of the outstanding common stock of Silay Company on August 1, 2012 at a total cost of
P5,005,000..At acquisition date, Silay's common stock and retained earnings amounted to P200,000 and P4,800,000,
respectively All of Silay's assets and liabilities had fair values equal to book values as of the acquisition date except for patents
which had a fair value of P1,800,000.and a book value of P400,000 The patents have a remaining life of five years. For 2012,
Silay had the following earnings and dividends.
Jan - Jul Aug - Dec
Net income....................................................P500,000..........P1,100,000
Dividends paid..............................................P300,000..........P1,200,000
Compute the net income attributable to the non-controlling interest?
a. P594,000 c. P369,000
b. P667,500 d. P442,500