ACCA Applied Knowledge · Financial Accounting · Subsidiaries
P holds 60% of S for the whole year. S sold goods costing $80,000 to P for $100,000 during the year, and all remain in P's inventory at year end. S's profit for the year is $90,000 before adjusting for this. How much of the unrealised profit adjustment is charged to the non-controlling interest?
The non-controlling interest bears $8,000. The unrealised profit of $20,000 arises in the subsidiary's sale, so it reduces the subsidiary's profit, and the 40% non-controlling share of that reduction is $8,000.
- A$8,000Correct
- B$12,000
- C$20,000
- D$0
Explanation
Unrealised profit is 100,000 - 80,000 = 20,000. S made the sale, so the adjustment is shared between the parent and NCI. NCI share is 40% x 20,000 = 8,000. $12,000 is the parent's share, and $20,000 is the whole amount.
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