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MCQ on Consolidation of Accounts

1. Unrealized profit on goods sold and included in stock is deducted from:
(A) Capital Profit
(B) Revenue Profit
(C) Fixed Assets
(D) Minority interest

2. How is negative goodwill reported on the consolidated statement of financial position?
(A) As a negative asset i.e. shown on the asset side but as a deduction.
(B) A tenth of it is included in consolidated reserves and the remainder reported as a reserve.
(C) Included fully in the consolidated retained earnings.
(D) As a reserve, which may prefer-ably be titled a capital reserve

3. On a consolidated balance sheet, if the shares of a company have been bought for more than the balance sheet value then the difference would appear as:
(A) Profit on purchase
(B) Goodwill
(C) Capital reserve
(D) Loss on purchase

4. If stock is sold for a profit from one group member to another, how should this be dealt with in the final accounts?
(A) Stock should appear at the original cost
(B) The profits should be included but the stock would appear at the value sold for
(C) Profit on sale should be eliminated and the stock appears at the original cost
(D) Profits on the sale should be eliminated

5. Deduction of outsiders liabilities from total assets then dividing it by number of shares, the resultant figure will be
(A) Intrinsic value per share
(B) Net asset value per share
(C) Asset backing value per share
(D) All of the above

6. The claim by outsiders to assets featured on a consolidated balance sheet is known as:
(A) Subsidiary
(B) Negative goodwill
(C) Minority interest
(D) Wholly owned subsidiary

7. If the closing balance of general reserve of a subsidiary is more than the opening balance of general reserve then it can be concluded that
(A) Capital profits are debited to the General Reserve A/c
(B) Pre-acquisition dividend is declared by the subsidiary company
(C) Some profit must have been transferred to general reserve by debiting profit & loss account by the subsidiary company
(D) Bonus share capital is issued by the subsidiary company

8. On consolidation, if the total of the fair value of the assets acquired is less than the whole purchase consideration then the differences should be treated as:
(A) Negative goodwill
(B) Goodwill
(C) Profit on the acquisition
(D) Loss on the acquisition

9. What is the term used to describe dividends paid by one company in the group to another in the same group?
(A) Inter-group dividends
(B) Intra-group dividends
(C) Group dividends
(D) Interim dividends

10. Which of the following is true?
(A) Minority shareholder’s share of pre-acquisition losses should be added to the amount of Minority Interest.
(B) Holding company’s share of pre-acquisition losses must be debited to Profit & Loss A/c
(C) Dividend received out of pre-acquisition profits of the subsidiary should be credited to Investment A/c
(D) Dividend received out of post-acquisition profits of the subsidiary should be debited to Investment A/c

11. When dealing with consolidated balance sheets, the expression cost of control could be used instead of:
(A) Acquisition expenditure
(B) Goodwill
(C) Intangible investments
(D) Negative goodwill

12. Which of the following is not normally considered the right of an ordinary shareholder?
(A) An interest in the profits earned by the company
(B) An interest in the day-to-day running of the company
(C) An interest in the net assets of the company
(D) Voting rights at meetings

13. Which of the following is the best theoretical justification for consolidated financial statements?
(A) Inform the companies are one entity; in substance they are separate
(B) Inform the companies are separate; in substance, they are one entity
(C) In form and substance the companies are on the entity
(D) In form and substance the companies are separate

14. Pre-acquisition dividend received by Holding Company is credited to:
(A) Profit & Loss A/c
(B) Capital Profit
(C) Investment A/c
(D) None of the above

15. Preparation of consolidated Balance Sheet of holding company and its subsidiary company is as per –
(A) AS-11
(B) AS-20
(C) AS-21
(D) AS-23

16. Post-acquisition dividend received by Holding Company is:
(A) Debited to Profit & Loss A/c & Credited to Bank A/c
(B) Debited to Bank A/c and Credited to Investment A/c
(C) Debited to Investment A/c and Credited to Bank A/c
(D) Debited to Bank A/c and Credited to Profit & Loss A/c

17. The group’s share of the pre-acquisition reserves of a subsidiary form part of the:
(A) Goodwill calculation
(B) Group’s capital reserves
(C) Group’s revenue reserves
(D) Group’s share capital

18. Which exchange rate will be considered for the conversion of the share capital of the subsidiary company?
(A) Closing rate
(B) Opening Rate
(C) Actual rate on the date of share acquisition
(D) Average Rate

19. As per AS-21, a Consolidated Financial Statement will not be prepared by the parent company when-
(A) Control is intended to be temporary because the subsidiary is acquired and held exclusively with a view to its subsequent disposal in the near future
(B) Subsidiary company operates under severe long-term restrictions, which significantly impair its ability to transfer funds to the parent
(C) Both (A) and (B)
(D) None of the above

20. If A Ltd. is proved to be a subsidiary company of B Ltd., C Ltd. & D Ltd. then which company is liable to prepare Consolidated Financial Statement?
(A) B Ltd.
(B) C Ltd.
(C) D Ltd.
(D) All companies excluding A Ltd.

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