ACCA Applied Knowledge · Financial Accounting · Subsidiaries
Parent P owns 75% of subsidiary S. During the year S sold goods to P for $200,000 at a margin of 30% on selling price. At the year end, P still holds half of these goods. The non-controlling interest is measured at the proportionate share of net assets. By how much is the profit attributable to the non-controlling interest reduced by the unrealised profit adjustment?
The NCI's profit is reduced by $7,500. Unrealised profit is $200,000 x half x 30% = $30,000. Because the subsidiary was the seller, the adjustment is shared, and the 25% non-controlling interest bears $7,500 of it.
- A$7,500Correct
- B$30,000
- C$4,500
- D$3,000
Explanation
Unrealised profit = $200,000 x 1/2 x 30% = $30,000. S made the sale, so the seller is the subsidiary and the PUP is shared with the NCI. NCI share = 25% x $30,000 = $7,500. $30,000 would be the full adjustment, wrongly charged to NCI, and $22,500 is the parent's share.
Did you get it right without looking?
One question tells you little. A timed set on Subsidiaries shows your real accuracy, how long you take and where you lose marks.
More Subsidiaries questions
- Under IFRS 10 Consolidated Financial Statements, which of the following is the key criterion that establishes that one entity is a subsidiar…
- Ridge Co owns 90% of Moss Co. At the reporting date Moss declared and paid a dividend of $50,000 during the post-acquisition period, and the…
- 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…
- Alpha acquired 80% of the equity shares of Beta. In Alpha's consolidated statement of financial position, which of the following describes h…
- Which one of the following statements about goodwill arising on consolidation of a subsidiary under IFRS is correct?
- Max owns 100% of Mini. At the year end Max's payables include $15,000 owed to Mini, and Mini's receivables include $18,000 owed by Max. The …