AAT Level 4 - Professional Diploma in Accounting Consolidated Financial Statements Questions and Answers

Question 1

P plc acquired 80% of the ordinary share capital of S Ltd for £700,000.
At the date of acquisition, the fair value of S Ltd's identifiable net assets was £650,000.
The non-controlling interest (NCI) is to be valued using the proportionate share of net assets method.
In accordance with FRS 102, what is the amount of goodwill that should be recognised in the consolidated statement of financial position?

Accepted Answer

£180,000

Answer

£50,000

Answer

£130,000

Answer

£70,000

Question 2

At the year-end, Parent Ltd's inventory includes goods purchased from its wholly-owned subsidiary, Sub Ltd, for £30,000. Sub Ltd had originally produced these goods for £24,000. What is the correct consolidation adjustment required to eliminate the unrealised profit?

Accepted Answer

Debit Group retained earnings £6,000, Credit Group inventory £6,000

Answer

Debit Group revenue £30,000, Credit Group cost of sales £30,000

Answer

No adjustment is needed as the transaction was at arm's length

Answer

Debit Group inventory £6,000, Credit Group cost of sales £6,000

Question 3

A parent company acquires 70% of a subsidiary. At the reporting date, the subsidiary's statement of financial position shows equity of £500,000, which has increased from £400,000 at the date of acquisition due to post-acquisition profits. What is the value of the non-controlling interest (NCI) to be shown in the consolidated statement of financial position?

Accepted Answer

£150,000

Answer

£120,000

Answer

£350,000

Answer

£30,000

Question 4

According to FRS 102, which of the following statements best describes the appropriate accounting treatment for an investment in an associate in the consolidated financial statements?

Accepted Answer

The investment is accounted for using the equity method.

Answer

The associate's assets and liabilities are consolidated on a line-by-line basis.

Answer

The investment is measured at fair value with changes recognised in profit or loss.

Answer

The investment is carried at cost less any impairment losses.

Question 5

ParentCo sold a machine to its 100% subsidiary, SubCo, for £50,000 on the first day of the financial year. The machine had a carrying amount of £40,000 in ParentCo's books. The group depreciates these machines at 20% per annum on a straight-line basis. What is the net adjustment to reduce the carrying amount of non-current assets in the consolidated statement of financial position at the year-end?

Accepted Answer

£8,000

Answer

£10,000

Answer

£2,000

Answer

£12,000

Question 6

Under FRS 102, which of the following conditions is NOT, by itself, sufficient to establish that a parent entity has control over a subsidiary?

Accepted Answer

The ability to obtain significant economic benefits from the entity's activities.

Answer

Power over more than 50% of the voting rights through an agreement with other investors.

Answer

The power to appoint or remove a majority of the members of the board of directors.

Answer

Ownership of more than 50% of the entity's voting power.