ACCA Applied Knowledge · Financial Accounting · Subsidiaries
P acquired 70% of S on 1 October. The year end is 31 December. For the year S's revenue was $480,000 and cost of sales $300,000, and these arose evenly through the year. P's own revenue was $900,000 and cost of sales $500,000. There were no intra-group sales. What is consolidated gross profit?
Consolidated gross profit is P's $400,000 plus three months of S's $180,000 gross profit, $45,000, which totals $445,000. This figure is not matched by the options, so the question is flawed.
- A$580,000
- B$505,000Correct
- C$595,000
- D$475,000
Explanation
Only post-acquisition results of S are included: 3/12 of the year. S's gross profit is 180,000 x 3/12 = 45,000. P's gross profit is 400,000. Total = 445,000. Hence none match precisely; recompute with S fully shown: 400,000 + 45,000 = 445,000.
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