An associate is an entity in which an investor has significant influence over the investee.Which of the following indicate(s) the presence of significant influence?(i) The investor owns 330,000 of the 1,500,000 equity voting shares of the investee. (ii) The investor has representation on the board of directors of the investee.(iii) The investor is able to insist that all of the sales of the investee are made to a subsidiary of the investor.(iv) The investor controls the votes of a majority of the board members.
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1 .How should an associate be accounted for in the consolidated statement of profit or loss?
A The associate's income and expenses are added to those of the group on a line-by-line basis. B The group share of the associate's income and expenses is added to the group figures on a line-by- line basis. C The group share of the associate's profit after tax is recorded as a one-line entry. D Onl...
2 .Wellington owns 30% of Boot, which it purchased on 1 May 20X7 for USD2.5 million. At that date Boot had retained earnings of USD5.3 million. At the year end date of 31 October 20X7 Boot had retained earnings of USD6.4 million after paying out a dividend of USD1 million. On 30 September 20X7 Wellington sold USD700,000 of goods to Boot, on which it made 30% profit. Boot had resold none of these goods by31 October.At what amount will Wellington record its investment in Boot in its consolidated statement of financial position at 31 October 20X7?
A USD2,767,000 B USD2,900,000 C USD2,830,000 D USD2,620,000
3 .On 1 February 20X1 Picardy acquired 35% of the equity shares of Avignon, its only associate, for $10 million in cash. The post-tax profit of Avignon for the year to 30 September 20X1 was $3 million. Profits accrued evenly throughout the year. Avignon made a dividend payment of $1 million on 1 September 20X1. At 30 September 20X1 Picardy decided that an impairment loss of $500,000 should be recognised on its investment in Avignon.What amount will be shown as 'investment in associate' in the statement of financial position of Picardy as at 30 September 20X1?
A $9,967,000 B $9,850,000 C $9,200,000 D $10,200,000
4 .Jarvis owns 30% of McLintock. During the year to 31 December 20X4 McLintock sold USD2 million of goods toJarvis, of which 40% were still held in inventory by Jarvis at the year end. McLintock applies a mark-up of25% on all goods sold.What effect would the above transactions have on group inventory at 31 December 20X4?
A Debit group inventory USD48,000 B Debit group inventory USD160,000 C Credit group inventory USD48,000 D No effect on group inventory
6 .An associate is an entity in which an investor has significant influence over the investee.Which of the following indicate(s) the presence of significant influence?(i) The investor controls the votes of a majority of the board members.(ii) The investor is able to insist that all of the sales of the investee are made to a subsidiary of the investor.(iii) The investor has representation on the board of directors of the investee.
A (i) B (ii) C (iii) D All of above
7 .The Caddy group acquired 240,000 of August’s 800,000 equity shares for $6 per share on 1 April 20X4.August’s profit after tax for the year ended 30 September 20X4 was $400,000 and it paid an equity dividend on 20 September 20X4 of $150,000.On the assumption that August is an associate of Caddy, what would be the carrying amount of the investment in August in the consolidated statement of financial position of Caddy as at 30 September 20X4?
A $1,455,000 B $1,500,000 C $1,515,000 D $1,395,000
8 .What is the purpose of amortisation?
A To allocate the cost of an intangible non-current asset over its useful life B To ensure that funds are available for the eventual purchase of a replacement non-current asset C To reduce the cost of an intangible non-current asset in the statement of financial position to itsestimated market value...
9 .Which of the following statements are correct?1 If company A has an investment in company B that gives it control over the company B, then the company B is classified as a subsidiary in the consolidated financial statements of company A.2 If a company has associates, but not subsidiaries, it will not prepare consolidated financial statements.3 If a company has a 21% investment in the voting equity of another company, it will account for its investment using the equity method.
A 1 and 2 B 3 and 2 C All three statements are correct D None of the statements are correct
10 .Which of the following statements is/are correct?1 AZ owns 25% of the preferred (non-voting) share capital of BX, which means that BX is an associate of AZ.2 CW has a 10% shareholding in DY and can appoint 4 out of 6 directors to the board of DY, so DY is classified as a subsidiary of CW.3 ES has significant influence over FT, which means that FT is an associate of ES.4 GR owns 55% of the share capital of HU, but by agreement with the minority shareholder, does not have control or significant influence over the financial and operating policies of HU, so HU is a simple investment of GR.
A 1 and 2 only B 3 and 2 only C 2, 3 and 4 only D 4 only
