5. CPA Financial Accounting and Reporting Mod 5
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33 questions
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1.
MULTIPLE CHOICE QUESTION
5 mins • 1 pt
During the last three years Harvert Co. has held 400 000 ordinary shares in Jamee Co. The issued share capital of Jamee Co. is one million shares totalling $500 000. The finance director of Harvert Co. is a director of Jamee Co. How should the investment in Jamee Co. be treated in the consolidated financial statements of Harvert Co.?
As a subsidiary
As an associate
As a current asset investment
As a non-current asset investment
2.
MULTIPLE CHOICE QUESTION
5 mins • 1 pt
A owns 51 per cent of the voting shares in B and 100 per cent of the voting shares in D. B owns 25 per cent of the voting shares in C and has board representation in that company. All holdings have been held for a number of years. Which of the following statements is correct?
B, C and D are subsidiaries of A
B and D are subsidiaries of A while C is a subsidiary of B
B and D are subsidiaries of A while C is an associate of B
is a subsidiary of A while B and C are investments of A
3.
MULTIPLE CHOICE QUESTION
5 mins • 1 pt
3 Which of the following is a valid reason for excluding a 75 per cent owned company from consolidation under current International Financial Reporting Standards?
The company operates in a hyperinflationary environment.
A formally documented decision has been made by the directors to wind down the activities of the ompany
The activities of the company are dissimilar from those of the rest of the group so that it would be confusing to include it in the consolidation.
The company operates in a country where the government has recently passed a law to obtain
4.
MULTIPLE CHOICE QUESTION
5 mins • 1 pt
Which of the following provide evidence of a parent-subsidiary relationship? I. The parent has representation on the board of directors. II. The parent has power to direct the operating activities of the entity by statute. III. The parent has the power to remove a majority of members of the board of directors. IV. The parent has power over more than 50 per cent of the voting rights through agreement with other investors.
IV only
I and IV only
II, III and IV only
I, II, III and IV
5.
MULTIPLE CHOICE QUESTION
5 mins • 1 pt
During the last financial year, Orius Co. acquired 44 per cent of the issued share capital of Eerus Co. Under the terms of the acquisition, the finance director of Orius was appointed to the board of directors of Eerus. Which of the following correctly describes how Orius should account for its interest in Eerus in the consolidated financial statements?
As a subsidiary, using equity accounting
As an associate, using equity accounting
As a subsidiary, using consolidation accounting
As an associate, using consolidation accounting
6.
MULTIPLE CHOICE QUESTION
5 mins • 1 pt
Which of the following provides evidence of a situation where the investee should be accounted for using the equity method?
A shareholding of 18 per cent in the investee
Provision of operational personnel by the parent to the investee
Provision of essential technical information by the parent to the investee
The parent has the power to govern the financial policies of the investee by agreement
7.
MULTIPLE CHOICE QUESTION
5 mins • 1 pt
Where a subsidiary does not prepare accounts to the same date as the parent company, which of the following is correct?
Additional financial statements must be prepared to the group reporting date by the subsidiary.
The subsidiary's accounts may be used for the consolidation provided that the gap between the reporting dates is three months or less.
The subsidiary's accounts may be used for the consolidation provided that they are prepared to a date within three months after the end of the group reporting period.
The subsidiary's accounts may be used for the consolidation provided that they are prepared to a date within three months before the end of the group reporting period.
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