On 1 January 20X0, Zed Ltd acquired 90 % of the share capital of Ned Ltd for $900 000 cash. At that date, the equity section of Ned Ltds balance sheet was as follows:

$

Share capital 700 000

Retained profits 50 000

Asset revaluation reserve 100 000

Assume all assets and liabilities were recorded at their fair values, except for a piece of equipment recorded at $50 000 but Zed Ltd considers it to have a fair value of $100 000. This equipment is not revalued by Ned Ltd.

What was the difference on acquisition under the partial method?

Select one:

$50 000 goodwill.

$90 000 goodwill.

Nil

$90 000 bargain purchase.

2.17

Which of the following statements is correct?

Select one:

Under AASB3 a partnership cannot be a member of a corporate group.

A subsidiary cannot use Weighted Average Cost to measure its inventory if the parent uses a different inventory method.

After it is taken over by a parent, a subsidiary must revalue all its financial statement items to fair value.

Companies that are jointly controlled by two or more other companies do not report under AASB3, Business Combinations.

3. On 1 July 20X0 Home Ltd lent $10 million to its wholly-owned subsidiary Loan Ltd. The loan is for a term of 10 years at a fixed rate of 15% per annum. Loan Ltd pays this interest each year on 30 June. What is the consolidation elimination entry for the year ended 30 June 20X1?

Select one:

A. Accounts Debit $ Credit $ Interest revenue 1,500,000 Interest expense 1,500,000 ---

B.

Accounts Debit $ Credit $

Loan payable 10,000,000

Loan receivable 10,000,000

Interest revenue 1,500,000

Interest expense 1,500,000

---C.

Accounts Debit $ Credit $

Loan receivable 10,000,000

Loan payable 10,000,000

Interest expense 1,500,000

Interest revenue 1,500,000

---

D. Accounts Debit $ Credit $ Loan payable 10,000,000 Loan receivable 10,000,000 ---