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FA Chapter 24 Questions Group Accounts The Consolidated Statement of Profit or Loss
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why for the question 4, 60% didn’t multiple first with 120000 and the answer we multiply it with (25/125) but directly take the margin and multiply it with the 120000?
Only 60% remain in inventory. The margin is 25% of the price at which P sold them to S.
80% Thank you sir for the wonderful class
Got 20%. This chapter is difficult.
Q1:
Hi, I don’t understand why we showed the entire profit generated by the subsidiary in P’s PnL while at the same time in example 1 from the lectures we split the profit to P and NCI’ according to their ownership?
In the consolidated SOPL we show the total profit of both the holding company and the subsidiary.
We also later show how much of that profit is attributable to the holding company and how much to the NCI. That is what I show in my lectures.
This question does not ask how much is attributable to each party.
I was a bit confused by the second quiz but now i think i got it clear. the profit made was over the four months(september to december) since P bought S. therefore the adjustment is 4/12*15000 in P’s SOPL and 80/100 * 15000 in P’s retained earnings as post acquisition retained earnings. hope this is true.
Almost.
The 4/12 x 15,000 = $5,000 will appear in the consolidated SOPL (not in P’s own SOPL which will only show P’s own profit).
Although not asked for, 20% of the $5,000 (the post-acquisition profit) is attributable to the NCI and the rest of the total consolidated profit (i.e. P’s own profit plus 80% x $5,000) is attributable to the shareholders of P.
In 2nd question p acquire 80% of S,s shares, but why it takes 100 at consolidation date?
Question 3 – if all of inventory is sold, why is $6000 still removed from revenue? Isn’t it ignored as profit has been realised?
I also got confused here, could you please explain this?
It seems that maybe you did not watch the free lectures on this before attempting the test 馃檪
$6,000 is removed from both the total sales and from the total purchases (and so the total profit is not affected, but the question only asked about the sales figure.).
We are required to do this, because the sales in P’s accounts will include 6,000 sold to S, but we must only show the total sales outside the group. Similarly the purchases in S’s accounts will include 6,000 bought from S, but we must only show the total purchases from outside the group.
Because, if we don’t exclude it, those same goods will be included not only in S revenue (when they were sold to P) but also in P revenue when they were sold to the outside world
Now ask yourself this. How many times has the GROUP sold those goods to the outside world?
In consolidated financial statements we treat all the companies within the group together as though they were one big company and that or big company has sold those goods only once to the outside world
Ok?
The items on the right (Donate, Search, etc) are not hidden as usual did
I have to scroll it left and right to read the whole questions
This problem also happens on FA Chapter 25 Questions
Thanks – it should be OK now