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ACCA Applied Knowledge · Financial Accounting · Subsidiaries

Parent P acquired 80% of Subsidiary S on 1 April 20X4. Both have a 31 December year end. For the year ended 31 December 20X4, P's revenue was $900,000 and S's revenue was $480,000 (earning evenly through the year). During the post-acquisition period, P sold goods to S for $60,000. All of these goods remain in S's inventory at the year-end. What is consolidated revenue for the year ended 31 December 20X4?

Consolidated revenue is $1,200,000. Include P's full-year revenue of $900,000 plus nine months of S's revenue ($360,000), then eliminate the $60,000 intra-group sale in full. Unrealised profit in inventory affects cost of sales, not revenue.

  1. A$1,200,000
  2. B$1,140,000Correct
  3. C$1,260,000
  4. D$1,320,000

Explanation

S is consolidated for 9 months: $480,000 x 9/12 = $360,000. Add P's revenue of $900,000 to give $1,260,000. Then eliminate the intra-group sale of $60,000 in full: $1,260,000 - $60,000 = $1,200,000. Wait, the unrealised profit does not affect revenue, only cost of sales. So the correct figure is $1,200,000.

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