SS 2 Account Second Term Practice Questions Review

Let’s break them down one by one for clarity:

1. Lilac has acquired 12,000 N1 shares in its subsidiary, Purple, by issuing 5 of its own N1 shares for every 4 shares in Purple. The market value of Lilac shares is N6. Calculate the cost of investing in Purple.

   To calculate the cost of investment in Purple, we need to multiply the number of shares acquired (12,000) by the number of Lilac shares issued per Purple share. Since Lilac issued 5 of its shares for every 4 of Purple’s shares, we need to establish the price of the Lilac shares and the cost:

   Investment Cost = (12,000 shares in Purple ÷ 4 shares per Lilac share) × 5 Lilac shares per Purple share × N6 (market value of Lilac shares) = 12,000 ÷ 4 × 5 × N6 = N90,000

2. ______ profit arises when a subsidiary is acquired with accumulated profit.

   Answer: Pre-acquisition profit.

3. _______ is acquired when a premium is paid above the fair value of the net assets acquired over a subsidiary.

   Answer: Goodwill.

4. The Non-controlling interest in a subsidiary consists of shareholders who are not part of the parent company and they are totally unaffected by any distinction between pre- and post-acquisition ______.

   Answer: Profits.

5. In the purchase method of consolidation, assets and liabilities of subsidiaries are measured at ______ value on the date of acquisition.

   Answer: Fair value.

6. Cost of control account in a Group account can also be referred to as _________ account.

   Answer: Goodwill account.

7. Under Group accounts, ______ share capital includes all share capital other than non-participating preference shares.

   Answer: Equity.

8. Peach shall be deemed to be the subsidiary of Strawberry if _________.

   Answer: A, B & C (assuming options relate to control criteria or shareholder ownership)

9. The following are reasons why a parent entity is allowed not to present or prepare consolidated financial statements except ________.

   Answer: If the company is indebted to another company.

10. Before IFRS 3, there were two main methods of preparing consolidated financial statements, the purchase method and the pooling of interests method. Currently, IFRS 3 allows ______.

    Answer: Only the purchase method.

11. A ________ is an enterprise that is controlled by another enterprise known as the parent.

    Answer: Subsidiary.

12. The following are items which must appear on the face of the statement of financial position as a minimum disclosure except ________.

    Answer: Gross profit.

13. Information is _______ if its omission or misstatement could affect or influence the decision-making of users of financial statements.

    Answer: Material.

14. ________ financial statements are the financial statements of a group presented as those of a single enterprise.

    Answer: Consolidated.

15. When financial information is complete, neutral, and free from error, users can refer to such information as _______.

    Answer: Faithful representation.

16. _______ are the standards that were in use in Nigeria before the adoption of IFRS.

    Answer: SAS (Statement of Accounting Standards).

17. A ______ company is one that has one or more subsidiaries.

    Answer: Holding company.

18. A group is defined as a parent company and its __________.

    Answer: Subsidiaries.

19. The following are the elements of financial statements as stipulated in the conceptual framework except ________.

    Answer: Ratios.

20. Cash flows are basically reported under the following activities except ________.

    Answer: Lending.