Page 515 - F2 Integrated Workbook STUDENT 2019

Supplementary objective test questions

CHAPTER 13 – COMPLEX GROUP STRUCTURES

13.1 JPS acquired 80% of the share capital of BMH in 20X4. BMH purchased 60% of
the share capital of EMS on 1st Oct 20X9.

JPS calculates goodwill using the proportionate method.

Which of the following adjustments would impact JPS’s consolidated
retained earnings as at the year ended 31st Dec 20X9?

A BMH sold goods to EMS at a 25% margin. None of the goods were left in
EMS at the year end.

B A fair value uplift to BMH’s land was required on acquisition of $400,000

C JPS determined that the investment in EMS was impaired by $200,000

D The indirect holding adjustment arising on the acquisition of EMS by BMH

13.2 SW purchased 60% of Splash on 1st June 20X7. Splash had acquired 70% of
Sauna on 31st August 20X8. The year-end is 31st December 20X8

Which of the following statements are false? Choose all that apply

A The consolidated statement of financial position will include 100% of the
assets and liabilities of SW, Splash and Sauna.

B The NCI percentages in Splash and Sauna used within the consolidated
accounts are 40% and 30% respectively.

C An indirect holding adjustment (IHA) is necessary when calculating the
goodwill of Sauna. The IHA is calculated as 40% of the cost of investment
in Sauna.

D The group retained earnings will include 42% of Sauna’s post-acquisition
profits.

E Sauna will be consolidated from 1st June 20X7. Splash will be
consolidated from 31st August 20X8.

507