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CA Final · Integrated Business Solutions (Multidisciplinary Case Study with Strategic Management) · Financial Reporting

Case: Meera Ltd. owns 60% of Tara Ltd. (acquired at 1 April 2023, NCI at proportionate net assets). In 2024-25 Tara sold goods costing Rs 150 lakh to Meera for Rs 200 lakh; Meera still holds 50% of them. Tara's reported profit after tax is Rs 300 lakh. Ignore tax on adjustments. What is the profit attributable to NCI for 2024-25?

Profit attributable to NCI is Rs 110 lakh. The upstream unrealised profit of Rs 25 lakh reduces the subsidiary's profit to Rs 275 lakh, and NCI's 40% share of that is Rs 110 lakh. Upstream eliminations are shared between parent and NCI.

  1. ARs 110 lakhCorrect
  2. BRs 120 lakh
  3. CRs 100 lakh
  4. DRs 130 lakh

Explanation

Upstream sale: unrealised profit = (200-150) x 50% = Rs 25 lakh, which reduces the subsidiary's profit. Adjusted profit = 300 - 25 = Rs 275 lakh. NCI share 40% = Rs 110 lakh. Rs 120 lakh ignores the adjustment, and Rs 100 lakh wrongly deducts the full 25 from NCI share only.

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