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Hi sir,
Hope you’re doing well.
In questions 25.2 and 25.3 (bpp practice and revision kit)
In 25.2 for unrealised profit it says Black invoiced bury at cost plus 40%
So we did 12M X 40%X30%.
In25.3 for unrealised profit similar type question ..it says …these good were invoiced cost plus 20%
But here for unreliased profit they have done 240,000X20/120 X50%
Why is that in 25.2 thy jus multiplied by 40% and in 25.3 they did 20/120?
Im confused kindly,explainAnd in 25.4 task 3
Profit attributable to:
In NCI why are they not subtracting unrealised profit. Shouldn’t it be
(25%X260-48)
But in the book they have done 25%X260Why haven’t they subtracted the unrealised profit?
Is it because in this scenario it is the parent company that sold goods to the child company ?
If it is so , when parent company sells goods to subsidiary company we don’t subtract unrealised profit for calculating NCI?
And when subsidiary company sells good to the parent company we subtract the unrealised profit when calculating NCI?
Kindly, clarify.In 25.2 it says that the goods originally cost $12M and they were invoiced at cost plus 40%. So the profit was 40% x 12M
However in 25.3 it says that the invoice value (i.e. the sales price to Norton) was $240,000. They were invoiced at cost plus 20%, so the invoiced amount was 120% of cost and the profit is therefore 20/120.
The unrealised profit will have been recorded in the accounts of the company that did the selling. So if the parent sold the goods to the subsidiary then the unrealised profit reduces the retained earnings of the parent (and it doesn’t affect the NCI). If the subsidiary sold the goods to the parent, then the unrealised profit reduced the rationed earrings of the subsidiary, which does affect the NCI.
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