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Dear Mike,
If you have a BPP exam kit, could you please help me understand the solutions for following questions?
1. For Q122, why is profit margin calculated as 25%?
2. For Q124, when calculating NCI for comprehensive income, why does the solution subtract the entire goodwill impairment from the profit? Shouldn’t they only subtract the NCI share of this impairment as NCI is measured at fair value?
“If you have a BPP exam kit, …”
I don’t, sorry
Give me the name of the questions and I’ll try to find them on the internet
Or even an examination reference eg “June 2012”
These are questions from MCQ bank in ACCA F7 practice and revision kit.
Q122 involves companies Hillusion and Skeptik.
Q124 involves companies Wiley and Coyote.
I really appreciate your help!
1) Hillusion and Skeptik
“…sold goods to Skeptik at a price of $12m.These goods had cost Hillusion $9m”
Cost + profit = selling price
9 + 3 = 12What percentage is 3 of 12?
2) I seem to have read recently that BPP have accepted that there is a mistake in their answer
My answer to this question is option C
You ask why BPP has taken the full amount of the goodwill impairment against the post-acquisition profits? Because that’s what we do! And THEN we allocate ‘our share’ and ‘nci share’
My answer C is calculated as:
half year profits $800,000
additional depreciation on the fair value increase that happened on date of acquisition ($2,000,000 / 20 * 6/12) $(50,000)
goodwill impairment $(500,000)
revaluation gain $1,550,000total $1,800,000
nci share 20% x $1,800,000 = $360,000
That figure of $1,550,000?
Revalued amount at date of acquisition $22,000,000
half year’s depreciation ($22,000,000 / 20 * 6/12) = $550,000
carrying value at year end $21,450,000
revalued to $23,000,000 ie post acquisition revaluation of $1,550,000OK?
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