These amounts 20 x 200 000 20 x 300 000 As Evil Ltd is

These amounts 20 x 200 000 20 x 300 000 as evil ltd is

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Evil Ltd only has a 20% interest, so it gets a 20% share of the dividends. These amounts are: $40 000 (20% x $200 000) and $60 000 (20% x $300 000). As Evil Ltd is not a parent it must use equity accounting for associates’ dividends in a single entity set of financial statements. AASB 128 makes no distinction between pre-and post investment dividends; all are regarded as a reduction of the carrying amount of the investment.18. ANS: A Dockers is only an investment, since Brown must have significant influence over both the operating and financial policies over another entity for that entity to be classed as an associate. PTS: 1 PTS: 1
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20. ANS: A The total equity is $850 000 and this is recorded at fair value because all the assets and liabilities are recorded at fair value. Equity is therefore the fair value of the net assets acquired. Zed Ltd paid $900 000, which is $50 000 more than the fair value of the net assets acquired so this is the amount of goodwill.21. ANS: B The total equity is $500 000 and this is recorded at fair value because all the assets and liabilities are recorded at fair value. Equity is therefore the fair value of the net assets acquired. John Ltd paid $400 000, which is $100 000 less than the fair value of the net assets acquired so this is the amount of bargain purchase.22. ANS: D The increase to investment in subsidiaries will be $1 000 000, not $800 000. The total equity is $800 000 and this is recorded at fair value because all the assets and liabilities are recorded at fair value. Equity is therefore the fair value of the net assets acquired. Ringo Ltd paid $1 000 000, which is $200 000 more than the fair value of the net assets acquired so this is the amount of goodwill. However this amount will not be reported in the separate statements; instead it is reported in the consolidated statements.24. ANS: C T is a subsidiary. With no equity increases in Company T, the profit can only have been paid from pre-acquisition equity, but under AASB 127.38A the amount must now be recorded as revenue.26. ANS: C Under AASB 3, share ownership is not the main issue in determining whether an entity should be consolidated. It is whether the investor entity can govern decision-making over both the operating and financing policies of the investee.28. ANS: D The NCI in M Ltd (which is 40%) has no claim over the net assets of Z Ltd because M Ltd has no direct or indirect interest in Z Ltd.29. ANS: A L Ltd has an indirect ownership of O Ltd via its direct ownership of M Ltd 3% (60% x 5%) plus a direct ownership of O Ltd (70%). The total is 73%. PTS: 1 PTS: 1 PTS: 1 PTS: 1 PTS: 1 PTS: 1 PTS: 1
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31. ANS: C The ultimate parent entity is the first level entity in a group and that entity is F Ltd in this case. The other parent entity is H Ltd. G Ltd is more likely a non-reporting entity because it is 100% owned, although more information may allow a conclusion of reporting entity to be made. From the information provided, though, it is reasonable to conclude it is non-reporting. K is unlikely to be a subsidiary of any entity in this group.33. ANS: D See the section on the ‘entity concept’ in the text (pp. 501-505), where the group is viewed as a distinctive entity wholly different from any of its members.34. ANS: D PTS: 1 PTS: 1
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