Question 1

When a subsidiary company that has a non-controlling interest (NCI)declares a dividend,the treatment in the consolidated statement of financial position of dividends not paid is:
A)The non-controlling interest portion of the dividend owing should be eliminated along with the parent entity's share, leaving a zero balance in dividends payable.
B)The NCI's portion should be deducted from the non-controlling interest's share in equity.There should be no dividend amounts remaining in the consolidated statement of financial position, but the amount owed to the NCI should be disclosed separately.
C)The amount owing to NCI as a dividend payable should be included in the consolidated statement of financial position as a current liability.
D)The amount of dividends payable to both the parent entity and the NCI will be reflected in the consolidated statement of financial position.

Accepted Answer

When a subsidiary declares a dividend, the portion of the dividend payable to the non-controlling interest (NCI) is recognized as a liability in the consolidated statement of financial position. This is because, from the perspective of the consolidated entity, this amount is an obligation to the NCI shareholders.

Question 2

Where the parent entity holds less than 100 per cent interest in a subsidiary,IAS 10 requires the remaining shareholders' interests in what items to be disclosed?
A)the subsidiary's share capital and reserves
B)the subsidiary's profit or loss
C)the subsidiary's current and non-current assets
D)the subsidiary's share capital and reserves and the subsidiary's profit or loss

Accepted Answer

When the parent entity holds less than 100% interest in a subsidiary, IAS 10 requires disclosure of the subsidiary's share capital and reserves as well as the subsidiary's profit or loss. Disclosure of the subsidiary's current and non-current assets is not explicitly required by IAS 10.

Question 3

In calculating the proportion of a subsidiary's profit that is attributable to owners who are not part of the group,all adjustments to the group's profit should be treated as affecting the calculation for the outside owners.

Accepted Answer

In calculating the proportion of a subsidiary's profit attributable to non-controlling interests (outside owners), only those adjustments that affect the subsidiary's profit should be considered, not all adjustments to the group's profit.

Question 4

Which of the following situations,involving eliminations as part of the consolidation process,would not have implications for the calculation of non-controlling interest?
A)the sale of a non-current asset by the subsidiary to the parent
B)the payment of a management fee by the subsidiary to the parent
C)the sale of inventory by the parent to the subsidiary
D)the payment of a management fee by the subsidiary to the parent and the sale of inventory by the parent to the subsidiary

Accepted Answer

The answer of Which of the following situations,involving eliminations as...

Question 5

The disclosure of non-controlling interests in the (a)comprehensive income statement; and (b)statement of financial position is as follows:
A)(a) profit or loss attributable to non-controlling interest in the notes; (b) non-controlling interest in equity as a separate line item
B)(a) profit or loss attributable to non-controlling interest on the face; (b) non-controlling interest in equity as part of share capital
C)(a) profit or loss attributable to non-controlling interest in the notes; (b) non-controlling interest in equity as part of share capital
D)(a) profit or loss attributable to non-controlling interest on the face; (b) non-controlling interest in equity as a separate line item

Accepted Answer

The most commonly used and appropriate method for disclosing non-controlling interest in the comprehensive income statement is by disclosing profit or loss attributable to non-controlling interest on the face of the statement. In the statement of financial position, non-controlling interest is usually presented as a separate line item below equity. Therefore, option D, which suggests (a) profit or loss attributable to non-controlling interest on the face; (b) non-controlling interest in equity as a separate line item, is the best choice.

Question 6

Acquirer Plc purchased 75 per cent of Subby Plc for €45 000.The fair value of identifiable assets was €95 000,and the fair value of liabilities and contingent liabilities amounted to €47 000.According to IFRS 10,what would be the amount of 'goodwill allocated to non-controlling interests of Subby Plc'?
A)€3000
B)€9000
C)€12 000
D)(€3000)

Accepted Answer

Goodwill = €95,000 - €47,000 - €45,000 = €3,000Non-controlling interest = 25%Goodwill allocated to non-controlling interests = €3,000 x 25% = €750

Question 7

IFRS 10 Consolidated and Separate Financial Statements prescribes that non-controlling interests be presented in the consolidated statement of financial position as a liability.

Accepted Answer

Non-controlling interests are presented as a separate component of equity, not as a liability, in the consolidated statement of financial position according to IFRS 10.

Question 8

Only dividends payable to the parent entity are eliminated against dividends receivable in the accounts of the parent entity.

Accepted Answer

This is correct. The elimination process is used to remove transactions between a parent entity and its subsidiaries in consolidated financial statements. Dividends payable and receivable between entities are eliminated to avoid double-counting and to present a more accurate picture of the overall financial position of the consolidated group. However, only dividends payable to the parent entity are eliminated against dividends receivable in the accounts of the parent entity, as dividends payable to the subsidiaries are not relevant to the parent entity's financial statements.

Question 9

IAS 1 Presentation of Financial Statements requires an entity to disclose separately in the statement of comprehensive income,profit or loss for the period attributable to non-controlling interests and owners of the parent.

Accepted Answer

IAS 1 requires separate disclosure of profit or loss attributable to non-controlling interests and owners of the parent in the statement of comprehensive income.

Question 10

One of the steps in preparing consolidated financial statements is working out the amounts to be attributed to non-controlling interests to determine the amount to be eliminated in the consolidation process.

Accepted Answer

The answer of One of the steps in preparing consolidated...

Question 11

On 1 July 2015 Harry Ltd purchased 80 per cent of the issued share capital of Wills Ltd and has control of Wills.The fair value of the net assets of Wills Ltd on that date was represented as follows: $$\begin{array} { | l | r | } 
\hline\text { Share capital } & \$ 2000000 \
\hline \text { Retained earnings } & 500000 \
\hline & \$ 2500000 \
\hline
\end{array}$$ Harry Ltd paid cash consideration of $2 500 000 for Wills.Wills Ltd made an operating profit of $350 000,there were no intragroup transactions during the period ended 30 June 2016.Goodwill had been determined to have been impaired during the year by $25 000.What consolidation journal entries are required for the period and what is the non-controlling interest in equity as at 30 June 2016?
A) $$\begin{array}{l}
\begin{array} { | l | l | r | r | } 
\hline  { \text { Consolidation journal entries: } } & & \
\hline \mathrm { Dr } & \text { Share capital } & 1600000 & \
\hline \mathrm { Dr } & \text { Retained earnings } & 400000 & \
\hline \mathrm { Dr } & \text { Goodwill } & 500000 & \
\hline \mathrm { Cr } & \text { Investment in Wills Ltd } & & 2500000 \
\hline & & & \
\hline \mathrm { Dr } & \text { Impairment loss } & 25000 & \
\hline \mathrm { Cr } & \text { Accumulated impairment loss } & & 25000 \
\hline & & & \
\hline
\end{array}\
\text { Non-controlling interest: }\
\begin{array} { | l | r | r | } 
\hline \text { Operating profit } & 70000 & \quad\quad\
\hline \text { Opening retained earnings } & 100000 & \
\hline \text { Share capital } & 400000 & \
\hline \text { Total } & 570000 & \
\hline
\end{array}
\end{array}$$
B) $\begin{array}{|l|l|r|l|}
\hline \text { Consolidation journal entries: } & & \
\hline \mathrm{Dr} & \text { Share capital } & 2000000 & \
\hline \mathrm{Dr} & \text { Retained earnings } & 500000 & \
\hline \mathrm{Cr} & \text { Investment in Wills Ltd } & & 2500000 \
\hline &\
\hline
\end{array}$

$\begin{array}{|l|l|l|}
\hline \text { Non-controlling interest: }&&\quad\quad\
\hline \text { Retained earnings } & 100000 \
\hline \text { Share capital } & \underline{400000} \
\hline \text { Total } & 500000\
\hline 
\end{array}$

C) $$\begin{array}{l}
\begin{array} { | l | l | r | r | } 
\hline { \text { Consolidation journal entries: } } & & \
\hline \mathrm { Dr } & \text { Share capital } & 1600000 & \
\hline \mathrm { Dr } & \text { Retained earnings } & 400000 & \
\hline \mathrm { Dr } & \text { Goodwill } & 500000 & \
\hline \mathrm { Cr } & \text { Investment in Wills Ltd } & & 2500000 \
\hline & & & \
\hline \mathrm { Dr } & \text { Impairment loss } & 25000 & \
\hline \mathrm { Cr } & \text { Accumulated impairment loss } & & 25000 \
\hline & & & \
\hline
\end{array}\
\text { Non-controlling interest: }\
\begin{array} { | l | r | l | } 
\hline \text { Operating profit } & 65000 &\quad\quad\quad \
\hline \text { Opening retained earnings } & 100000 & \
\hline \text { Share capital } & 400000 & \
\hline \text { Total } & \underline { 565000 } & \
\hline
\end{array}
\end{array}$$
D) $$\begin{array}{l}
\begin{array} { | c | l | r | r | } 
\hline  { \text { Consolidation journal entries: } } & & \
\hline \mathrm { Dr } & \text { Share capital } & 1600000 & \
\hline \mathrm { Dr } & \text { Retained earnings } & 400000 & \
\hline \mathrm { Dr } & \text { Goodwill } & 500000 & \
\hline \mathrm { Cr } & \text { Investment in Wills Ltd } & & 2500000 \
\hline & & & \
\hline \mathrm { Dr } & \text { Impairment loss } & 25000 & \
\hline \mathrm { Cr } & \text { Accumulated impairment loss } & & 25000 \
\hline & & & \
\hline
\end{array}\
\text { Non-controlling interest: }\
\begin{array} { | l | r | r | } 
\hline \text { Operating profit } & 68750 &\quad\quad\quad \
\hline \text { Opening retained earnings } & 100000 & \
\hline \text { Goodwill } & 125000 & \
\hline \text { Share capital } & 400000 & \
\hline \text { Total } & 693750 & \
\hline
\end{array}
\end{array}$$

Accepted Answer

The consolidation journal entries eliminate the investment in Wills Ltd against the share capital and retained earnings of Wills Ltd, recognizing goodwill. The impairment loss is recorded separately. The non-controlling interest is calculated as 20% of Wills Ltd's equity, including the operating profit.

Question 12

Which of the following is not one of the stages used to determine non-controlling interest?
A)the non-controlling interest in the current period's profit or loss
B)the non-controlling interest in share capital at the date of acquisition of the subsidiary by the parent entity
C)the non-controlling interest in the goodwill at acquisition
D)the non-controlling interest in reserves at the date of acquisition of the subsidiary by the parent entity

Accepted Answer

The stages used to determine non-controlling interest are the non-controlling interest in the current period's profit or loss, the non-controlling interest in share capital at the date of acquisition of the subsidiary by the parent entity, and the non-controlling interest in reserves at the date of acquisition of the subsidiary by the parent entity. The non-controlling interest in goodwill at acquisition is not one of the stages used to determine non-controlling interest.

Question 13

In preparing consolidated financial statements non-controlling interests are allocated on a 'line-by-line' basis.

Accepted Answer

The answer of In preparing consolidated financial statements non-controlling interests...

Question 14

Which of the following statements is incorrect with regards to non-controlling interests in subsidiaries?
A)The requirement to eliminate the effects of intragroup transactions holds whether or not there are non-controlling interests.
B)The non-controlling interest's share in the dividends paid or proposed by the subsidiary is eliminated on consolidation.
C)The non-controlling interest's share of the profits of the subsidiary is calculated after adjustments to eliminate income and expenses of the subsidiary that are unrealised from the economic entity's perspective.
D)Management fees paid in an intragroup transaction are considered realised when determining non-controlling interests in a subsidiary.

Accepted Answer

The non-controlling interest's share in the dividends paid or proposed by the subsidiary is not eliminated on consolidation. Dividends paid to non-controlling interests are a distribution of profits to those shareholders and do not get eliminated in the consolidation process.

Question 15

Non-controlling interests are allocated on a 'line-by-line' basis throughout the statement of comprehensive income.

Accepted Answer

The answer of Non-controlling interests are allocated on a 'line-by-line'...

Question 16

Groucho Ltd purchased 60 per cent of the issued capital and in the process gained control over Marx Ltd on 1 July 2014.The fair value of the net assets of Marx Ltd at purchase was represented by: $$\begin{array} { | l | r | } 
\text { Share capital } & \$ 2140000 \
\hline \text { Retained earnings } & 840000 \
\hline & \$ 2980000 \
\hline
\end{array}$$ Groucho Ltd paid cash consideration of $1 850 000 for Marx Ltd.During the period ended 30 June 2015,Marx Ltd paid management fees of $200 000 to Groucho Ltd and Marx had an operating profit of $530 000.Marx Ltd paid a dividend of $100 000 during the period.Groucho purchased inventory from Marx during the period for $80 000.The inventory cost Marx Ltd $56 000 and at the end of the period Groucho had 50 per cent of that inventory still on hand.Goodwill has been determined to have been impaired by $6200 during the period.Companies in the group use perpetual inventory systems and accrue dividends when they are declared by subsidiaries.Ignore tax implications. For the period ended 30 June 2015,what consolidation journal entries are required and what is the non-controlling interest?
A) $\text { Consolidation journal entries: }$
$\begin{array}{|l|l|r|l|}
\hline \mathrm{Dr} & \text { Share capital } & 1284000 & \
\hline \mathrm{Dr} & \text { Retained earnings } & 504000 & \
\hline \mathrm{Dr} & \text { Goodwill } & 62000 & \
\hline \mathrm{Cr} & \text { Investment in Marx Ltd } & & 1850000 \
\hline\
\hline \mathrm{Dr} & \text { Impairment loss } & 6200 & \
\hline \mathrm{Cr} & \text { Accumulated impairment loss } & & 6200 \
\hline & & & \
\hline \mathrm{Dr} & \text { Management fee revenue } & 120000 & \
\hline \mathrm{Cr} & \text { Management fee expense } & & 120000\
\hline\
\hline \mathrm{Dr} & \text { Dividend revenue } & 60000 & \
\hline \mathrm{Cr} & \text { Dividend paid } & & 60000 \
\hline & & & \
\hline \mathrm{Dr} & \text { Sales revenue } & 48000 & \
\hline \mathrm{Cr} & \text { Cost of goods sold } & & 48000 \
\hline\
\hline \mathrm{Dr} & \text { Cost of goods sold } & 7200 & \
\hline \mathrm{Cr} & \text { Inventory } & & 7200 \
\hline
\end{array}$

$\text { Non-controlling interest: }$
$\begin{array}{|l|r|l|}
\hline \text { Operating profit } & 292000& \quad\quad\quad\
\hline \text { Opening retained earnings } & 336000 \
\hline \text { Dividends } & (40000) \
\hline \text { Share capital } & 856000 \
\hline \text { Total } & 1444000 \
\hline
\end{array}$
B) $\text { Consolidation journal entries: }$
$\begin{array}{|l|l|r|r|}
\hline \mathrm{Dr} & \text { Share capital } & 2140000 & \
\hline \mathrm{Dr} & \text { Retained earnings } & 840000 & \
\hline \mathrm{Cr} & \text { Non-controlling interest } & & 1130000 \
\hline \mathrm{Cr} & \text { Investment in Marx Ltd } & & 1850000 \
\hline & &  & \
\hline \mathrm{Dr} & \text { Management fee revenue } &120000 & \
\hline \mathrm{Cr} & \text { Management fee expense } & &120000  \
\hline\
\hline \mathrm{Dr} & \text { Dividend revenue } & 60000 & \
\hline \mathrm{Cr} & \text { Dividend paid } & & 60000 \
\hline & & & \
\hline \mathrm{Dr} & \text { Sales revenue } & 48000 & \
\hline \mathrm{Cr} & \text { Cost of goods sold } & & 48000 \
\hline\
\hline \mathrm{Dr} & \text { Cost of goods sold } & 7200 & \
\hline \mathrm{Cr} & \text { Inventory } & & 7200 \
\hline
\end{array}$

$\text { Non-controlling interest: }$
$\begin{array}{|l|r|r|}
\hline\text { Operating profit } & 212000&\quad\quad\quad \
\hline \text { Opening retained earnings } & 336000 \
\hline \text { Dividends } & (4000) \
\hline \text { Total } & 1475200\
\hline
\end{array}$

C) $\begin{array}{l}
\begin{array} { | c | l | r | r | } 
\hline \text { Consolidation journal entries: } & & \
\hline \mathrm { Dr } & \text { Share capital } & 1284000 & \
\hline \mathrm { Dr } & \text { Retained earnings } & 504000 & \
\hline \mathrm { Cr } & \text { Investment in Marx Ltd } & & 1788000 \
\hline & & & \
\hline \mathrm { Dr } & \text { Management fee revenue } & 120000 & \
\hline \mathrm { Cr } & \text { Management fee expense } & & 120000 \
\hline \mathrm { Dr } & \text { Dividend payable } & & \
\hline \mathrm { Cr } & \text { Dividend receivable } & 60000 & \
\hline & & & 60000 \
\hline \mathrm { Dr } & \text { Cost of goods sold } & & \
\hline \mathrm { Cr } & \text { Inventory } & 12000 & \
\hline & & & 12000 \
\hline
\end{array}\\end{array}$

$\begin{array}{l}
\text { Non-controlling interest: }\
\begin{array} { | l | r | r | } 
\hline \text { Operating profit } & 207200 &\quad\quad\quad\quad \
\hline \text { Opening retained earnings } & 340800 & \
\hline \text { Dividends } & 40000 & \
\hline \text { Share capital } & 856000 & \
\hline \text { Total } & 1444000 & \
\hline
\end{array} \end{array}$

D) $\begin{array}{|l|l|r|r|}
\hline \mathrm{Dr} & \text { Share capital } & 1284000 & \
\hline \mathrm{Dr} & \text { Retained earnings } & 504000 & \
\hline \mathrm{Dr} & \text { Goodwill } & 62000 & \
\hline \mathrm{Cr} & \text { Investment in Marx Ltd } & & 1850000 \
\hline & &  & \
\hline \mathrm{Dr} & \text { Impairment loss } & 6200& \
\hline \mathrm{Cr} & \text { Accumulated impairment loss } & & 6200\
\hline & & & \
\hline \mathrm{Dr} & \text { Management fee revenue } & & \
\hline \mathrm{Cr} & \text { Management fee expense } & & \
\hline & &  & \
\hline \mathrm{Dr} & \text { Dividend revenue } &60000 &  \
\hline \mathrm{Cr} & \text { Dividend paid } & &60000 \
\hline & & & \
\hline \mathrm{Dr} & \text { Sales revenue } &80000  &  \
\hline \mathrm{Cr} & \text { Cost of goods sold } & &80000  \
\hline & &  & \
\hline \mathrm{Dr} & \text { Cost of goods sold } &12000 & \
\hline \mathrm{Cr} & \text { Inventory } & &12000 \
\hline
\end{array}$

$\begin{array}{l}
\text { Non-controlling interest: }\
\begin{array}{|l|r|r|}
\hline \text { Operating profit } & 207200&\quad\quad\quad \
\hline \text { Opening retained earnings } & 336000 \
\hline \text { Dividends } & (40000) \
\hline \text { Share capital } & 856000 \
\hline \text { Total } & 1359200\
\hline
\end{array}
\end{array}$

Accepted Answer

The answer of Groucho Ltd purchased 60 per cent of...

Question 17

Using full goodwill method,share of goodwill attributable to the non-controlling interests is recognised in the statement of financial position as part of non-controlling interest in equity.

Accepted Answer

In full goodwill method, the share of goodwill attributable to the non-controlling interests is recognised in the statement of financial position as part of non-controlling interest in equity.

Question 18

Green Ltd purchased 90 per cent of the issued capital and in the process gained control over Maroon Ltd on 1 July 2015.The fair value of the net assets of Maroon Ltd at purchase was represented by: $$\begin{array} { | l | r | } 
\text { Share capital } & \$ 3220000 \
\hline \text { Retained earnings } & 740000 \
\hline & \$ 3960000 \
\hline
\end{array}$$ Green Ltd paid cash consideration of $3 700 000 for Maroon Ltd.During the period ended 30 June 2017,Maroon Ltd paid management fees of $100 000 to Green Ltd and Maroon had an operating profit of $405 000.Maroon Ltd declared a dividend of $98 000 during the period.Green purchased inventory from Maroon during the period ended 30 June 2017 for $100 000.The inventory cost Maroon Ltd $85 000 and at the end of the period Green had 35 per cent of that inventory still on hand.Maroon's opening retained earnings for the period ended 30 June 2017 was $810 000.Goodwill has been determined to have been impaired by $13 600.Companies in the group use perpetual inventory systems and accrue dividends when they are declared by subsidiaries.There were no other inter-company transactions.Ignore tax implications. For the period ended 30 June 2017,what consolidation journal entries are required and what is the outside equity interest?
A) $\text { Consolidation journal entries: }$
$\begin{array}{|l|l|r|l|}
\hline \mathrm{Dr} & \text { Share capital } & 2898000 & \
\hline \mathrm{Dr} & \text { Retained earnings } & 666000 & \
\hline \mathrm{Dr} & \text { Goodwill } & 136000 & \
\hline \mathrm{Cr} & \text { Investment in Maroon Ltd } && 3700000 \
\hline\
\hline \mathrm{Dr} & \text { Impairment loss } & 13600 & \
\hline \mathrm{Cr} & \text { Accumulated impairment loss } & & 13600 \
\hline & & & \
\hline \mathrm{Dr} & \text { Management fee revenue } & 90000 & \
\hline \mathrm{Cr} & \text { Management fee expense } & & 90000\
\hline\
\hline \mathrm{Dr} & \text { Dividend revenue } & 88200 & \
\hline \mathrm{Cr} & \text { Dividend paid } & & 88200 \
\hline & & & \
\hline \mathrm{Dr} & \text { Sales revenue } & 90000 & \
\hline \mathrm{Cr} & \text { Cost of goods sold } & & 90000 \
\hline & & & \
\hline \mathrm{Dr} & \text { Cost of goods sold } & 4725 & \
\hline \mathrm{Cr} & \text { Inventory } & & 4725 \
\hline
\end{array}$

$\text { Non-controlling interest }$ 
$\begin{array}{|l|r|r|}
\hline \text { Operating profit } & 40500&\quad\quad\quad \
\hline \text { Opening retained earnings } & 81000 \
\hline \text { Dividends } & (9800) \
\hline \text { Share capital } & \underline{322000} \
\hline \text { Total } & \underline{433700} \
\hline
\end{array}$
B) $\text { Consolidation journal entries: }$
\(\begin{array}{|l|l|r|r|}
\hline \mathrm{Dr} & \text { Share capital } & 2898000 & \
\hline \mathrm{Dr} & \text { Retained earnings } & 666000 & \
\hline \mathrm{Dr} & \text { Goodwill } & 136000 & \
\hline \mathrm{Cr} & \text { Investment in Maroon Ltd } & & 3700000 \
\hline & & 13600 & \
\hline \mathrm{Dr} & \text { Impairment loss } & & 13600 \
\hline \mathrm{Cr} & \text { Accumulated impairment loss } & & \
\hline & & 100000 & \
\hline \mathrm{Dr} & \text { Management fee revenue } & & 100000\
\hline\
\hline \mathrm{Dr} & \text { Dividend payable } & 88200 & \
\hline \mathrm{Cr} & \text { Dividend declared } & & 88200 \
\hline & & 88200 & \
\hline \mathrm{Dr} & \text { Dividend revenue } & & 88200 \
\hline \mathrm{Cr} & \text { Dividend receivable } & & \
\hline & & 100000 & \
\hline \mathrm{Dr} & \text { Sales revenue } & & 100000 \
\hline \mathrm{Cr} & \text { Cost of goods sold } & & \
\hline & & & \
\hline \mathrm{Dr} & \text { Cost of goods sold } & 5250 \
\hline \mathrm{Cr} & \text { Inventory } & & 5250 \
\hline
\end{array}\)

$\text { Non-controlling interest: }$
$\begin{array}{|l|r|r|}
\hline \text { Operating profit } & 39975 &\quad\quad\quad\
\hline \text { Opening retained earnings } & 81000 \
\hline \text { Dividends } & (9800) \
\hline \text { Share capital } & \underline{322000} \
\hline \text { Total } & 433175 \
\hline
\end{array}$

C) $ \text { Consolidation journal entries: } $
\(\begin{array}{l}
\begin{array} { | c | l | r | r | } 
\hline \mathrm { Dr } & \text { Share capital } & 2898000 & \
\hline \mathrm { Dr } & \text { Retained earnings } & 666000 & \
\hline \mathrm { Cr } & \text { Investment in Maroon Ltd } & & 3564000 \
\hline & & & \
\hline \mathrm { Dr } & \text { Management fee expense } & 10000 & \
\hline \mathrm { Cr } & \text { Management fee revenue } & & 10000 \
\hline & & & \
\hline \mathrm { Dr } & \text { Dividend payable } & 88200 & \
\hline \mathrm { Cr } & \text { Dividend declared } & & 88200 \
\hline \mathrm { Dr } & \text { Dividend revenue } &88200  & \
\hline \mathrm { Cr } & \text { Dividend receivable } & &88200  \
\hline & & & \
\hline \mathrm { Dr } & \text { Sales revenue } & 90000& \
\hline \mathrm { Cr } & \text { Cost of goods sold } &  &90000 \
\hline 
\end{array}\\
\text { Non-controlling interest: }\
\begin{array} { | l | r | l | } 
\hline \text { Operating profit } & 40500 &\quad\quad\quad \
\hline \text { Opening retained earnings } & 74000 & \
\hline \text { Dividends } & ( 9800 ) & \
\hline \text { Share capital } & 322000 & \
\hline \text { Total } & 426700 & \
\hline
\end{array}
\end{array}\)
D) \(\begin{array}{|c|l|r|r|}
\hline \text { Consolidation journal entries: } & & \
\hline \mathrm{Dr} & \text { Share capital } & 3220000 & \
\hline \mathrm{Dr} & \text { Retained earnings } & & 740000 \
\hline \mathrm{Cr} & \text { Non-controlling interest } & & 260000 \
\hline \mathrm{Cr} & \text { Investment in Maroon Ltd } & & \
\hline & & 100000 & \
\hline \mathrm{Dr} & \text { Management fee revenue } & & 100000 \
\hline \mathrm{Cr} & \text { Management fee expense } & & \
\hline\
\hline \mathrm{Dr} & \text { Dividend payable } & 88200 & \
\hline \mathrm{Cr} & \text { Dividend declared } & & 88200 \
\hline & & & \
\hline \mathrm{Dr} & \text { Dividend revenue } & 88200 & \
\hline \mathrm{Cr} & \text { Dividend receivable } & & 88200 \
\hline\
\hline \mathrm{Dr} & \text { Sales revenue } & 90000 & \
\hline \mathrm{Cr} & \text { Cost of goods sold } & & 90000 \
\hline & & & \
\hline \mathrm{Dr} & \text { Cost of goods sold } & 5250 & \
\hline \mathrm{Cr} & \text { Inventory } & & 5250 \
\hline\
\hline\text { Non-controlling interest: }\

\hline \text { Operating profit } && 50500 \
\hline \text { Opening retained earnings } && 74000 \
\hline \text { Dividends } && (9800) \
\hline \text { Share capital } && \underline{322000} \
\hline \text { Total } && 436700 \
\hline
\end{array}\)

Accepted Answer

The correct consolidation journal entries and non-controlling interest calculations are provided in option B, considering the impairment of goodwill, management fees, dividends, and inventory adjustments.

Question 19

Finger Ltd purchased 75 per cent of the issued capital and in the process gained control over Nail Ltd on 1 July 2013.The fair value of the net assets of Nail Ltd at purchase was represented by: $$\begin{array} { | l | r | } 
\text { Share capital } & \$ 3760000 \
\hline \text { Retained earnings } & 1320000 \
\hline & \$ 5080000 \
\hline
\end{array}$$ Finger Ltd paid cash consideration of $4 000 000 for Nail Ltd.During the period ended 30 June 2015,Nail Ltd paid management fees of $540 000 to Finger Ltd and Nails had an operating profit of $980 000.Nails' opening retained earnings at the beginning of the period were $1 460 000.At the end of the period Nail Ltd declared a dividend of $90 000.There were no other inter-company transactions.Goodwill was determined to have been impaired by $19 000 during the period.Companies in the group accrue dividends when they are declared by subsidiaries. For the period ended 30 June 2015,what consolidation journal entries are required and what is the non-controlling interest?
A) $$\begin{array}{l}
\begin{array} { | c | l | r | r | } 
\hline { \text { Consolidation journal entries: } } & & \
\hline \mathrm { Dr } & \text { Share capital } & 2820000 & \
\hline \mathrm { Dr } & \text { Retained earnings } & 990000 & \
\hline \mathrm { Cr } & \text { Investment in Wills Ltd } & & 3810000 \
\hline & & & \
\hline \mathrm { Dr } & \text { Management fee revenue } & 540000 & \
\hline \mathrm { Cr } & \text { Management fee expense } & & 540000 \
\hline & & & \
\hline \mathrm { Dr } & \text { Dividend payable } & 90000 & \
\hline \mathrm { Cr } & \text { Dividend receivable } & & 90000 \
\hline & & & \
\hline
\end{array}\
\text { Non-controlling interest: }\
\begin{array} { | l | r | l | } 
\hline \text { Operating profit } & 245000 &\quad\quad\quad \
\hline \text { Opening retained earnings } & 365000 & \
\hline \text { Share capital } & 940000 & \
\hline \text { Total } & 1550000 & \
\hline
\end{array}
\end{array}$$
B) $\text { Consolidation journal entries: }$
$\begin{array}{|l|l|r|l|}
\hline \mathrm{Dr} & \text { Share capital } & 3760000 & \
\hline \mathrm{Dr} & \text { Retained earnings } & 1320000 & \
\hline \mathrm{Cr} & \text { Non-controlling interest } & & 1080000 \
\hline \mathrm{Cr} & \text { Investment in Wills Ltd } & & 4000000\
\hline\
\hline \mathrm{Dr} & \text { Impairment loss } & 19000 & \
\hline \mathrm{Cr} & \text { Accumulated impairment loss } & & 19000 \
\hline & & & \
\hline \mathrm{Dr} & \text { Management fee revenue } & 540000 & \
\hline \mathrm{Cr} & \text { Management fee expense } & & 540000\
\hline\
\hline \mathrm{Dr} & \text { Dividend payable } & 67500 & \
\hline \mathrm{Cr} & \text { Dividend receivable } & & 67500 \
\hline
\end{array}$

$\text { Non-controlling interest }$ 
$\begin{array}{|l|r|r|}
\hline\text { Operating profit } & 245000&\quad\quad\quad \
\hline \text { Dividend } & \underline{22500} \
\hline \text { Total } & 267500\
\hline
\end{array}$
C) $\text { Consolidation journal entries: }$
$\begin{array}{|l|l|r|l|}
\hline\mathrm{Dr} & \text { Share capital } & 2820000 & \
\hline \mathrm{Dr} & \text { Retained earnings } & 990000 & \
\hline \mathrm{Dr} & \text { Goodwill } & 190000 & \
\hline \mathrm{Cr} & \text { Investment in Wills Ltd } & & 4000000\
\hline\
\hline \mathrm{Dr} & \text { Impairment loss } & 19000 & \
\hline \mathrm{Cr} & \text { Accumulated impairment loss } & & 19000 \
\hline & & & \
\hline \mathrm{Dr} & \text { Management fee revenue } & 540000 & \
\hline \mathrm{Cr} & \text { Management fee expense } & & 540000\
\hline\
\hline \mathrm{Dr} & \text { Dividend payable } & 67500 & \
\hline \mathrm{Cr} & \text { Dividend declared } & & 67500 \
\hline & & & \
\hline \mathrm{Dr} & \text { Dividend revenue } & 67500 & \
\hline \mathrm{Cr} & \text { Dividend receivable } & & 67500 \
\hline
\end{array}$

$\text { Non-controlling interest: }$
$\begin{array}{|l|r|r|}
\hline \text { Operating profit } & 245000 &\quad\quad\quad\
\hline \text { Opening retained earnings } & 365000 \
\hline \text { Dividend } & (22500) \
\hline \text { Share capital } & \underline{940} 000 \
\hline \text { Total } & 1527500 \
\hline
\end{array}$

D) $\text { Consolidation journal entries: }$
$\begin{array}{|l|l|r|r|}
\hline \mathrm{Dr} & \text { Share capital } & 2820000 & \
\hline \mathrm{Dr} & \text { Retained earnings } & 1320000 & \
\hline \mathrm{Cr} & \text { Non-controlling interest } & & 140000 \
\hline \mathrm{Cr} & \text { Investment in Wills Ltd } & & 4000000 \
\hline\
\hline \mathrm{Dr} & \text { Impairment loss } & 14000 & \
\hline \mathrm{Cr} & \text { Non-controlling interest } & & 14000 \
\hline & & & \
\hline \mathrm{Dr} & \text { Management fee revenue } & 540000 & \
\hline \mathrm{Cr} & \text { Management fee expense } & & 540000 \
\hline\
\hline \mathrm{Dr} & \text { Dividend payable } & 67500 & \
\hline \mathrm{Cr} & \text { Dividend receivable } & & 67500 \
\hline & & & \
\hline \mathrm{Dr} & \text { Dividend revenue } & 67500 & \
\hline \mathrm{Cr} & \text { Dividend declared } & & 67500 \
\hline
\end{array}$

$\text { Non-controlling interest }$
$\begin{array}{|l|r|l|}
\hline \text { Operating profit } & 357500 &\quad\quad\quad \
\hline \text { Opening retained earnings } & 342500 & \
\hline \text { Share capital } & 940000 & \
\hline \text { Total } & 1640000 &\
\hline
\end{array}$

Accepted Answer

The answer of Finger Ltd purchased 75 per cent of...

Question 20

As prescribed in IFRS 10,which of the following statements is incorrect with regards to non-controlling interests in subsidiaries?
A)Non-controlling interests are presented in the consolidated statement of financial position within equity, separately from the equity of the owners of the parent.
B)Profit or loss and each component of other comprehensive income are attributed to the owners of the parent and to the non-controlling interests.
C)Total comprehensive income is attributed to the owners of the parent and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.
D)All of the given statement are correct.

Accepted Answer

All the given statements are correct according to IFRS 10 regarding non-controlling interests in subsidiaries.

Quiz 22: Further Consolidation Issues II: Accounting for Non-Controlling Interests

When a subsidiary company that has a non-controlling interest (NCI) declares a dividend,the treatment in the consolidated statement of financial position of dividends not paid is:

Where the parent entity holds less than 100 per cent interest in a subsidiary,IAS 10 requires the remaining shareholders' interests in what items to be disclosed?

In calculating the proportion of a subsidiary's profit that is attributable to owners who are not part of the group,all adjustments to the group's profit should be treated as affecting the calculation for the outside owners.

Which of the following situations,involving eliminations as part of the consolidation process,would not have implications for the calculation of non-controlling interest?

The disclosure of non-controlling interests in the (a) comprehensive income statement; and (b) statement of financial position is as follows: