FINANCIAL ACCOUNTING: CONSOLIDATIONS & ADVANCED ISSUES [FA4] EXAMINATION
Time: 4 Hours
All calculations must be shown in an orderly manner to obtain part marks.
Round all calculations to the nearest dollar.
Narratives for journal entries are not required unless specifically requested.
Assume a December 31 fiscal year end unless specifically stated otherwise.
Assume all amounts are material unless directed otherwise.
Assume all companies are public companies unless otherwise noted.
Assume no companies use differential reporting unless otherwise noted.
Assume companies apply new
sections related to Business Combinations; that is, sections 1582, 1601, and 1602.
Select the best answer for each of the following unrelated items. Answer each of these items in your
examination booklet by giving the number of your choice. For example, if the best answer for item (a) is
(1), write (a) (1) in your examination booklet. If more than one answer is given for an item, that item will
not be marked. Incorrect answers will be marked as zero. Marks will not be awarded for explanations.
2 marks each
On January 1, 2010, PAR Ltd. purchased 60% of SUB Ltd. for $240,000. The carrying amount of
SUB’s identifiable net assets was $400,000. During 2010 SUB reported net earnings of $70,000 and
paid dividends of $25,000. PAR has been using the cost method to account for its investment in SUB,
but on December 31, 2010, management wants to change to the equity method. What amount should
PAR add to its “Investment in SUB Ltd.” account to make this change?
Declan Ltd. has income before tax of $100,000 for the year ended December 31, 2010. Included in the
company’s 2010 expenses were $10,000 in non-deductible golf club fees and pension expense of
$62,000. The company made a $54,000 contribution to its defined benefit pension plan during 2010.
Capital cost allowance was equal to depreciation expense in 2010. Declan’s enacted tax rate at
December 31, 2010 was 25%. What is Declan’s current income tax expense for 2010?