For question 7, shouldnt Tour’s portion of the consol income be for 4 months (Oct – Jan) rather than 8 months . I calculated Tour’s portion as 90, so along with Tangier’s 260, it would be 350. Where did i go wrong

during the post-acquisition period of 4 months, he gained double, so 4*2=8. {8X (pre-acquisition) and 8X (post-acquisition)}. Therefore 360*8/16 is 180 and 260+180 is 440, so the answer is $440

If we have 3 months pre-acquisition and 9 months post-acquisition and post-acquisition monthly revenue is on average twice the pre-acquisition monthly revenue, then revenue for each of the 3 months pre-acquisition is, say, $1,000 and revenue for each of the 9 months post-acquisition is therefore $2,000

So total revenue for the year is $3,000 + $18,000 = $21,000 of which $18,000 (or 18/21) relates to the post-acquisiiton period

Now eliminate any intra-group revenue and there’s your answer

Hello, could you please explain me: in question 5 « Whey had managed to sell only 1/5 from 25000 purchased ». Doesn’t it mean that we need to do adjustment only for 20000 left in the group? Thank you

vanchin says

For question 7, shouldnt Tour’s portion of the consol income be for 4 months (Oct – Jan) rather than 8 months . I calculated Tour’s portion as 90, so along with Tangier’s 260, it would be 350. Where did i go wrong

nandy0130 says

during the post-acquisition period of 4 months, he gained double, so 4*2=8. {8X (pre-acquisition) and 8X (post-acquisition)}. Therefore 360*8/16 is 180 and 260+180 is 440, so the answer is $440

ibikunlet says

I do not understand why $17,250 was added to the cost of sales in #3. I will appreciate an explanation of this.

vanchin says

that is the unrealised profit, which has to be added back after we account for intragroup sales of (55 x 12 = 660)

sh4n1 says

@bulgermarina , that is to calculate the PURP, i.e. to reach at COS figure

stegeo says

Hello, Could you please explain me how total revenue is calculated on questions 5, 6 and 7? Many thanks in advance.

MikeLittle says

If we have 3 months pre-acquisition and 9 months post-acquisition and post-acquisition monthly revenue is on average twice the pre-acquisition monthly revenue, then revenue for each of the 3 months pre-acquisition is, say, $1,000 and revenue for each of the 9 months post-acquisition is therefore $2,000

So total revenue for the year is $3,000 + $18,000 = $21,000 of which $18,000 (or 18/21) relates to the post-acquisiiton period

Now eliminate any intra-group revenue and there’s your answer

Is that better?

stegeo says

That’s been cleared up now. Thank you for your prompt reply.

bulgermarina says

Hello, could you please explain me: in question 5 « Whey had managed to sell only 1/5 from 25000 purchased ». Doesn’t it mean that we need to do adjustment only for 20000 left in the group? Thank you

Akunyili says

Please I still do not understand your explanation if how we calculated revenue in questions 5 to 7.

rezaul070797 says

Thank you Sir,

for a great Explanation which make the context calculation clear.