PFRS 10 Flashcards
A “group” for consolidation purposes is
a. A parent and all of the subsidiaries.
b. An entity that has one or more subsidiaries.
c. An entity, including an unincorporated entity such as partnership, controlled by another entity.
d. An entity that obtains control over entities.
a. A parent and all of the subsidiaries.
It is the entity that controls one or more entities.
a. Investor
b. Parent
c. Associate
d. Affiliate
b. Parent
It is an entity that is controlled by another entity.
a. Subsidiary
b. Associate
c. Investee
d. Affiliate
a. Subsidiary
Control is presumed to exist when the parent owns directly or indirectly through subsidiaries
a. More than half of the equity of an entity. b. More than half of the ordinary shares of an entity.
c. More than half of the preference and ordinary shares of an entity.
d. More than half of the voting power of an entity.
d. More than half of the voting power of an entity.
What is the initial measurement of an investment in subsidiary retained by the investor when control is lost?
a. Fair value at the date when control is lost
b. Fair value at the beginning of the reporting period c. Carrying amount at the date when control is lost
d. Management estimate of fair value
a. Fair value at the date when control is lost
Consolidated financial statements are typically prepared
when one entity has a controlling financial interest in another unless
The subsidiary is a finance entity.
b. The fiscal year-ends of the two entities are more than three months apart.
c. Such control is likely to be temporary.
d. The two entities are in unrelated industries, such as manufacturing and real estate.
c. Such control is likely to be temporary
Consolidated financial statements are typically prepared when one entity has a controlling financial interest in another unless
a. The subsidiary is a bank.
b. The fiscal year-ends of the two entities are more than three months apart.
c. The investee is in bankruptcy.
d. The two entities are in related industries.
c. The investee is in bankruptcy
A subsidiary shall be excluded from consolidation when a. The investor is a venture capital organization, mutual fund, uni unit trust or similar entity.
b. The business activities of the subsidiary are dissimilar from those of the other entities within the group.
c. The subsidiary is acquired with the intention to dispose of it within twelve months from date of
acquisition. d. The subsidiary is operating under severe long-term restrictions that significantly
c. The subsidiary is acquired with the intention to dispose of it within twelve months from date of
acquisition
Which of the following conditions is required to exclude a subsidiary from consolidation?
a. The other owners object to the nonconsolidation. b. The parent makes an election not to consolidate.
C. The subsidiary does not have any publicly traded debt or equity instruments.
d. The parent must own 100% of the subsidiary.
C. The subsidiary does not have any publicly traded debt or equity instruments.
A parent may exclude a subsidiary from consolidation only if all of the following conditions exist, except
a. The parent is wholly or partially owned and the other owners do not object to the nonconsolidation.
b. The parent does not have any debt or equity instruments publicly traded.
c. The parent has one class of share capital.
d. The ultimate parent prepares consolidated financial statements.
c. The parent has one class of share capital
- The subsidiary fiscal year-end is June 30 and the parent fiscal year-end is December 31. What is required in preparing consolidated financial statements?
a. The subsidiary should be consolidated using more recent interim financial statements.
b. The subsidiary should not be consolidated but the financial results are disclosed in the notes to the consolidated financial statements.
c. The subsidiary should be consolidated using the June 30 annual financial statements.
d. The subsidiary should not be consolidated but accounted for by the equity method in the consolidated financial statements.
a. The subsidiary should be consolidated using more recent interim financial statements
Penn Company, a manufacturing entity, owns 75% of the ordinary shares of Sell Company, an investment entity. Sell owns 60% of the ordinary shares of Vane Company, an insurance entity. In Penn’s consolidated financial statements, should consolidation accounting or equity method be used for Sell and Vane?
a. Consolidation used for Sell and equity method used for Vane
b. Consolidation used for both Sell and Vane
c. Equity method used for Sell and consolidation used
for Vane
d. Equity method used for both Sell and Vane
b. Consolidation used for both Sell and Vane
Perez Company were sold goods with Company. During current year, Perez sold goods ita 40% gross profit to Senior. Senior sold all of these goods in the current year. How should the sue adjusted? Perez and Senior income statement items be adjusted?
a. Sales and cost of goods sold should be reduced by the intercompany sales. .
b. Sales and cost of goods sold should be reduced by 80%.
c. Net income should be reduced by 80% of the gross profit.
d. No adjustment is necessary.
a. Sales and cost of goods sold should be reduced by the intercompany sales
Water Company owns 80% of Fire Company. At current year-end, Fire sold equipment to Water at a price in excess of Fire’s carrying amount, but less than the original cost. In the consolidated statement, the carrying amount of the equipment should be reported at
a. Water’s original cost b. Fire’s original cost
c. Water’s original cost less Fire’s recorded gain
d. Water’s original cost less 80% of Fire’s recorded gain
c. Water’s original cost less Fire’s recorded gain
Port Company owns 100% of Salem Company. At the beginning of current year, Port sold Salem equipment at a gain. Port had owned the equipment for two years and used a five-year straight line depreciation no residual value. Salem is using a three-year straight line depreciation. In the consolidated statement, Salem’s recorded depreciation expense should be decreased by
a 20% of the gain on sale
b. 33 1/3% of the gain on sale
c. 50% of the gain on sale d. 100% of the gain on sale
b. 33 1/3% of the gain on sale
