1.6 If the Investor Company owns 20% of the stock of the Investee Company and the Investee Company reports a profit of R100 000, then how much should an Investor Company report as an equity income? (2)
A. R80 000
B. R20 000
C. R100 000
D. R60 000
1.7 If the parent undertaking owns 60% of subsidiary Lev Ltd and Lev Ltd owns 40% of another subsidiary Hinds Ltd. What percentage of Hinds Ltd is owned by the parent company? (2)
A. 12%
B. 40%
C. 60%
D. 24%
1.8 Identify the option that is correct about the treatment for positive goodwill. (1)
A. Write off immediately to the income statement
B. Recognize as an asset and carry in the balance sheet at its original value
C. Recognize as an asset and amortize over a period of time
D. Recognize as an asset and test for impairment regularly
1.9 In the consolidated balance sheet, the subsidiary's individual assets are accounted for by which method? (1)
A. Netted against its liabilities and shown net
B. Shown separately
C. Added to the parent company's individual assets and liabilities
D. Not included
1.10 Which option(s) applies when consolidating statements of financial position? (2)
i. All inter-company balances should be cancelled
ii. The group share of the whole of subsidiary’s profit is included within group profit
iii. Inter-company profit should be eliminated unless it is realized by sale to an outsider
iv. Subsidiary’s asset values need to be updated at the end of each accounting period
A. ii & iii
B. i & iv
C. i & iii
D. i & ii
1.11 An associate is an entity over which the investor has______. (1)
A. control
B. joint control
C. significant influence