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Supplementary objective test questions

CHAPTER 12 – BASIC GROUP ACCOUNTS

12.1 Which of the following situations is unlikely to represent control over an
investee?

A Owning 55% and being able to elect 4 of the 7 directors.

B Owning 51%, but the constitution requires that decisions need the
unanimous consent of shareholders.

C Having currently exercisable options which would take the shareholding of
the company to 55%.

D Owning 40% of the shares, but having the majority of voting rights within
the company.

12.2 Pepper has a 75% subsidiary, Salt. During the year, Pepper sold inventory to
Salt for a price of $900,000. Salt has since sold 80% of that inventory on to third
parties. The sale was at a mark-up of 20% on cost to Pepper.

What is the adjustment to inventory that would be included in the
consolidated statement of financial position of Pepper at the year-end?

A $30,000

B $36,000

C $120,000

D $150,000

12.3 Panther owns 75% of Shadow. Shadow sells to Panther for $7,800 with a
margin of 20%. 40% of these goods have subsequently been sold on by
Panther to external parties by the reporting date.

Which of the following adjustments would Panther make as a result of the
above transaction when preparing its consolidated statement of financial
position?

A Dr Consolidated retained earnings $780, Cr Inventory $780

B Dr Consolidated retained earnings $585 Dr NCI $195, Cr Inventory $780

C Dr Consolidated retained earnings $936, Cr inventory 936

D Dr Consolidated retained earnings $702 Dr NCI 234, Cr Inventory $936

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