I n t e r a c t I v e t e X t foundations in Accountancy/ acca financial accounting (ffa/FA) bpp learning Media is an acca approved Content Provider

statements of Barracuda Inc? 

1 

Investment of 30,000 ordinary shares in Minnow Inc. Minnow has a total of 45,000 

ordinary shares.  

2 

Investment of 21% of the ordinary shares in Major Inc. Barracuda Inc has the right to 

appoint 4 out of 6 of the board of directors of Major Inc. 

 

Subsidiary Associate 

A 1 

2 

B 1, 

2 

– 

C – 

1, 

2 

D 2 

1 

 

(2 marks) 

BPP Tutor Toolkit Copy

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PRACTICE QUESTION BANK 

 

507 

88 

Which of the following statements is/are correct? 

1 

If a company owns more than 50% of the ordinary shares of another company, the 

investment will always be classified as a subsidiary.  

2 

Consolidated accounts are required for a group of companies in order to represent the 

legal form, rather than the substance, of the relationship between the parent and its 

subsidiaries. 

3 

An trade investment is an entity in which an investor has significant influence, which is 

neither a subsidiary or a joint venture of the investor.  

A 

1 and 2 only 

B 1 

only 

C 

All three statements are correct 

D 

None of the statements are correct 

(2 marks) 

89 

Alpha is an associate of Delta.  

How should profits generated by Alpha be shown in the consolidated accounts of Delta? 

A 

All the profits after tax generated by Alpha are included by consolidating the revenue and 

expenses of Alpha on a line by line basis from revenue down to profit for the year. 

B 

Delta's share of Alpha's profit after tax is included by the payment of a dividend from 

Alpha to Delta, which is shown in the consolidated statement of profit or loss of Delta. 

C 

Delta's share of Alpha's profit after tax is included in the consolidated statement of profit 

or loss of Delta as a single amount.  

D 

All the profits after tax generated by Alpha are included in the consolidated statement of 

profit or loss of Delta as a single amount.