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1) In example 4 when consolidating the Income Statement what I did was I decreased the intra group sales of Maul by 20 then took half of the remaining figure and then added 20 back to that one half and consolidated within the group 9 (same with Maul’s Cost of Sales)
I did this because as the intra group transactions start after acquisition and the revenue and COGS figures of Maul must contain pre and post figures which I thought I was adjusting fairly. Now I am somewhat confused. However, the Gross profit what same as per my workings
Kindly comment2)In example 5 the solution says carrying value = GW plus FV at acquisition plus post acq profits. Shouldn’t it be the 60% of the post acq profit?
Regards
Hi,
1) It doesn’t matter if your gross profit figure is the same, that will have happened purely by chance. If you watch the video then it will explain the answer fully.
2) No. To calculate the net assets at the end of the year we need to take the net assets at the start of the year and add on the profits for the year. Remember we are looking at the value of the subsidiary as a whole.
Thanks
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