Question 26.25: X co acquired 80% of the equity share capital in Y.co on 31.7.20X6. Extracts from the two companies’s statements of profit and loss for the year ended 30.9.20X6 were as follows:
– – – Xco($’000) Y co ($’000)
Revenue 3,400 2,400
Cost of sales 1,500 1,800
During the year ended 30.9.20X6, Y co sold goods for $5000 each month to X co, at a mark up of 25%. At the end of the year X co had 50% of these goods left in inventories.
What is the group gross profit for the year ended on 30.09.20X6?
The answer for the question in book is $ 2,001,000, but I think it should be $1,999,999, may be due to that fact that unrealised profit ($1000) should be deducted to $2,000,000, but not added to $2,000,000 to arrive at the answer!
Please verify me for this typo
The BPP answer is indeed wrong.
They should have added the 1,000 to the cost of sales and so the cost of sales should be 1,791. The profit should therefore be 1,999.
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