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Question 01

'Minority interests' are:

a) shares in the parent company held other than by the company's directors.

b) shares in subsidiary companies held by a fellow subsidiary company.

c) shares in subsidiary companies held other than by its parent company.

d) non-equity shareholders in the parent company.

Question 02

Company A bought 70% of the equity share capital of Company B for £150,000, when the fair value of Company B was £100,000. What is the value of the goodwill arising on this acquisition?

a) £80,000

b) £50,000

c) £150,000

d) £35,000

Question 03

Company X owns 80% of Company Y, and Company Y owns 70% of Company Z. What % (direct and indirect) do minority interests own in Company Z?

a) Direct 30% and 14% indirect

b) Direct 30% and 20% indirect

c) Direct 20% and 30% indirect

d) Direct 20% and 14% indirect

Question 04

Which one of the following would not need to be eliminated when preparing consolidated financial statements?

a) Sales by a subsidiary company to a company wholly owned by a minority shareholder in the subsidiary

b) Loans from a parent to its subsidiary

c) Trade debts owed by a subsidiary to its parent company

d) Trade debts owed by one subsidiary to another

Question 05

A company would be regarded as the associate of another company if it holds between which one of the following ranges of percentage equity shareholdings?

a) 10-19

b) 51-100

c) 0-9

d) 20-50

Question 06

A parent owns 75% of its subsidiary's voting shares. The subsidiary's turnover was £500,000, including £100,000 from intra-group trading. What turnover figure for the subsidiary will be consolidated in the group profit and loss account?

a) £400,000

b) £500,000

c) £275,000

d) £375,000

Question 07

The accounting treatment for associate companies is referred to as the equity method. What is another name for this method?

a) Acquisition accounting

b) One-line consolidation

c) Gross equity method

d) Investment accounting

Question 08

The accounting treatment when consolidating the results of joint ventures is known as:

a) acquisition accounting.

b) one-line consolidation.

c) gross equity method.

d) investment accounting.

Question 09

If a company owns less than 20% of the equity shares of another company, this relationship is known as:

a) joint venture.

b) parent/subsidiary.

c) investor/associated company .

d) simple investment.

Question 10

Company A trades extensively with a separate company, B, which is owned by the managing director's brother. To what extent, if any, is this relationship disclosed within the financial summaries?

a) It is not disclosed

b) Company B is disclosed as a 'related party'

c) As an illegal transaction, the company must report it to the police

d) The auditors must refer to the transactions in their report

Oxford University Press, Online Resource Centre, Chapter 10.

Chapter 10

Instructions