1. ABC Ltd. acquired 90% of XYZ Ltd. in 1990. There was no goodwill or fair valu

Question

1.
ABC Ltd. acquired 90% of XYZ Ltd. in 1990. There was no goodwill or fair value adjustment arising therefrom. For the year ended 30 June 2001, ABC Ltd. reported an after tax profit of $200,000, whilst XYZ Ltd. reported an after tax profit of $100,000. Included in these profits were unrealized profits arising from transactions between ABC Ltd and XYZ Ltd. These unrealized profits were $20,000 after tax earned by ABC Ltd and $10,000 after tax earned by XYZ Ltd.

The Non Controlling Interest in consolidated profit or loss is:

2.
Which of the following statements concerning consolidation is (are) INCORRECT?

A. Consolidation journal entries are necessary to eliminate and adjust the accounting records of the parent entity and its subsidiaries so that the aggregated financial data are presented from the viewpoint of the economic entity.
B. In consolidation, the parent entity’s investment in a subsidiary is eliminated against the subsidiary’s post-acquisition share capital and reserves.
C. Consolidation journal entries are prepared for the sole purpose of producing consolidated financial statements and are recorded in the books of the subsidiary concerned.
D. B and C
E. A, B and C

3. Which one of the following statements about the consolidation process is incorrect?

A There is no consolidation ledger.

B The consolidation journal records entries made up of debits and credits.

C Consolidation journal entries are posted to the parent entity’s general ledger.

D The financial statement elements of parent and subsidiary are added together, making appropriate adjustments, to produce consolidated financial statements.
E Transactions between parent and subsidiary are not included in consolidated financial statements.

Explanation / Answer

1)

Non Controlling Interest in consolidated profit or loss

Non Controlling Interest in consolidated profit or loss(@10%)

2. C

3.A

27,000.00

1)

Non Controlling Interest in consolidated profit or loss

After Tax Profit of ABC Ltd. 200,000.00 After Tax Profit of XYZ Ltd. 100,000.00 Consolidated ABC Ltd After Tax Profit 300,000.00 Profits on Inter Company Transaction    (30,000.00) Adjusted Consolidated profit after inter company transaction    270,000.00

Non Controlling Interest in consolidated profit or loss(@10%)

2. C

3.A

27,000.00

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