1. IFRS 10 - Consolidated Financial Statements sets out the requirements for the consolidation of entities under the control of the reporting entity. In which of the following scenarios is control deemed to exist according to IFRS 10?

(i) The reporting entity owns 40% of the voting equity in Mafuta Ltd. and has the right to appoint six directors to the board of ten.

(ii) The reporting entity owns 60% of the voting equity in Maziwa Ltd., and appoints only four directors to the board of ten.

a.

(ii) only

b.

Neither (i) nor (ii).

c.

(i) only

d.

Both (i) and (ii)

2. In the long run, a business must generate positive net cash flow from which of the following activities, if it is to survive?

a.

Investing activities.

b.

None of them is more important than the other

c.

Financing activities.

d.

Non cash activities

e.

Operating activities

3. Which of the following statements are correct when preparing consolidated financial statements?

A subsidiary cannot be consolidated unless it prepares financial statements to the same reporting date as the parent.

A subsidiary with a different reporting date may prepare additional statements up to the group reporting date for consolidation purposes.

A subsidiary's financial statements can be included in the consolidation if the gap between the parent and subsidiary reporting dates is five months or less.

Where a subsidiary's financial statements are drawn up to a different reporting date from those of the parent, adjustments should be made for significant transactions or events occurring between the two reporting dates.

a.

1 & 3 only

b.

1 & 2

c.

4 only

d.

2& 4

e.

1 & 4

f.

None of them

g.

All of them

h.

2 only

i.

3 only

j.

2 & 3

k.

1 only

4. Pamela acquired 80% of the share capital of Samantha on 1 January 2017. Part of the purchase consideration was $200,000 cash to be paid on 1 January 2020. The applicable cost of capital is 10%.

What will the deferred consideration liability be at 31 December 2018?

a.

$200,000

b.

$181,818

c.

$165,288

d.

$150,262

5. Alpha paid N$ 300 000 on 1 January 2010 to acquire 80% of Beta. On that date Beta had in issue one hundred thousand ordinary shares of N$1 each issued at N$1.20, but quoted on this date at N$1.45. identify the goodwill in Beta in each of the following alternative situations

(b) on 1 Januray 2010 Beta's retained earnings were N$ 60 000 and the fair value of their identifiable assets were N$ 80 000 more than their book value,

Select one:

a.

75 000

b.

169 000

c.

69 000

d.

60 000

6. Lang Ltd. acquired 100% of Linford Ltd. through a direct exchange. In the exchange, Lang issued $7,500,000 in shares to Linford. What journal entry must Linford record to reflect the exchange?

Select one:

a.

DR Cash 7,500,000 CR Retained earnings 7,500,000

b.

No journal entry is required

c.

DR Common shares 7,500,000 CR Retained earnings 7,500,000

d.

DR Cash 7,500,000 CR Common shares 7,500,000

7. Crash acquired 70% of Bangi's 100,000 N$1 ordinary shares for N$800,000 when the retained earnings of Bangi were N$570,000 and the balance in its revaluation surplus was N$150,000. Bang also has an internally-developed customer list which has been independently valued at N$90,000. The non-controlling interest in Bangi was judged to have a fair value of N$220,000 at the date of acquisition.

What was the goodwill arising on acquisition?

a.

N$163,000

b.

N$110,000

c.

N$200,000

d.

N$226,000

8. Pineapple Plc bought 70% of the equity shares in Kiwi Plc in 2010, paying a total of N$40 million. Goodwill arising on the acquisition was N$6 million. On 31 March 2017, Pineapple Plc sold its entire holding in Kiwi Plc for N$86 million. The carrying values relevant to Kiwi in the consolidated financial statements at that date were as follows:

Identifiable net assets N$103 million

Goodwill N$6 million

Non-controlling interest N$31 million

How much should be recognised in consolidated profit or loss with respect to the gain or loss on disposal of Kiwi?

Select one:

a.

N$15 million

b.

N$46 million

c.

N$9.7 million

d.

N$8.0 million

9. Grape Plc bought 40% of the equity shares of Plum Plc on 1 April 2016, at a cost of N$6.2 million. Grape Plc exerts significant influence over the management of Plum Plc. During the year ended 31 March 2017 Plum Plc reported profit for the year of N$2.5 million and other comprehensive income of N$500,000. The investment in Plum had a fair value of N$7.9 million at 31 March 2017.

What should be the carrying value of the investment in Plum Plc in the consolidated financial statements of Grape Plc on 31 March 2017?

Select one:

a.

N$6.2 million

b.

N$7.9 million

c.

N$7.4 million

d.

N$9.2 million

10. In consolidated financial statements which of the following should be excluded from consolidated revenue? (i) revenue from intra-group transactions (ii) revenue earned by group companies from sale of goods to associate companies (iii) associate company revenue

a.

(i) only

b.

(i) & (ii) only

c.

(i), (ii) & (iii)

d.

(i), & (iii) only

11. Which of the following is the criterion for treatment of an investment as an associate?

a.

Ownership of a majority of the equity shares

b.

Existence of significant influence

c.

Exposure to variable returns from involvement with the investee

d.

Ability to exercise control

12. Kora Co., a public enterprise, is a subsidiary of Bentel Ltd., a private enterprise. Bentel has chosen to report Kora using the equity method. In doing so what information must Bentel disclose in its notes to the financial statements?

Select one:

a.

Fair value of Kora's share capital

b.

Fair value of the investment in Kora

c.

Reconciliation of the equity method to consolidation

d.

Reconciliation of the equity method to the cost method

13. Banduka obtained a 60% holding in the 100,000 N$1 shares of Mist on 1 January 2018, when the retained earnings of Mist were N$850,000. Consideration comprised N$250,000 cash, N$400,000 payable on 1 January 2019 and one share in Banduka for each two shares acquired. Banduka has a cost of capital of 8% and the market value of its shares on 1 January 2018 was N$2.30.

Banduka measures non-controlling interest at fair value. The fair value of the non-controlling interest at 1 January 2018 was estimated to be N$400,000.

What was the goodwill arising on acquisition?

a.

N$119,370

b.

N$169,000

c.

N$139,370

d.

N$130,370

13. Python acquired 70% of the N$100,000 equity share capital of Ghost, its only subsidiary, for N$200,000 on

1 January 2021 when the retained earnings of Ghost were N$156,000. At 31 December 2021 retained earnings are as follows.

N$

Python 275,000

Ghost 177,000

Python considers that goodwill on acquisition is impaired by 50%. Non-controlling interest is measured at

fair value, estimated at N$82,800.

What are group retained earnings at 31 December 2021?

a.

N$289,700

b.

N$269,200

c.

N$276,300

d.

N$280,320

14. Peter limited owns 100% of the share capital of the following companies. The directors are unsure of whether the investments should be consolidated. In which of the following circumstances would the investment NOT be consolidated?

a.

Beta is a bank and its activity is so different from the engineering activities of the rest of the group that it would be meaningless to consolidate it

b.

Gamma is located in a country where a military coup has taken place and Peter limited has lost control of the investment for the foreseeable future

c.

Peter limited has decided to sell its investment in Alpha as it is loss-making; the directors believe its exclusion from consolidation would assist users in predicting the group's future profits

d.

Delta is located in a country where local accounting standards are compulsory and these are not compatible with IFRS used by the rest of the group

15.

Which of the following are not the exceptions for application of IFRS 13?

Select one:

a.

All of the above

b.

Hedge instruments within the scope of IFRS 9 Financial Instruments

c.

Leasing transactions within the scope of IAS 17 Leases

d.

Share-based payment transactions within the scope of IFRS 2 Share-based Payments

e.

Net realizable value of inventories within the scope of IAS 2 Inventories