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John Moffat.
John Moffat.-
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advus
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Dear tutor:Sand Co acquired 80% of the equity share capital of Sun Co several years ago. In the year to 31 December 20X4, Sand Co made a profit after taxation of $120,000 and Sun Co made a profit after taxation of $35,000. During the year Sun Co sold goods to Sand Co at a price of $40,000.The profit mark-up was 40% on the sales price. At 31 December 20X4,25% of these goods were still held in the inventory of Sand Co.
What profit is attributable to the parent company in the consolidated statement of profit or loss of the Sand Group for the year to 31 December 20X4?
I want to know how to calculate it,why the answer is 144800 and not 144000?Thank you!
John Moffat
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Sun sold the goods and therefore included in Sun’s profit is 25% x 40% x $40,000 = $4,000 in respect of the goods still in Sand’s inventory.
Therefore the consolidate profit is 120,000 + (80% x (35,000 – 4,000)) = $144,800.
advus
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