- This topic has 8 replies, 3 voices, and was last updated 1 month ago by
.
- Posts
At 1 January 20X8 Tom Co acquired 80% of the share capital of Jerry Co for $100,000. At that date the share capital of Jerry Co consisted of 50,000 equity shares of $1 each and its reserves were $30,000. At 31 December 20X9 the reserves of Tom Co and Jerry Co were as follows:
ined no as taken can also
Tom Co
$400,000
Jerry Co
$50,000
In the consolidated statement of financial position of Tom and its subsidiary Jerry at 31 December 20X9, what amount should appear for group reserves?
$400,000
$438,000
$416,000
$404,000
My question is why did we use $50000 share capital to calculate net asset at acquisition date not $100000 as tom acquired 80% share capital of jerry for 100000The total net assets of any company are always equal to the share capital plus reserves.
However I don’t know why you are interested in the net assets at the date of acquisition for being able to answer this question. It asks for the group reserves and they are the total of Tom’s reserves plus Tom’s share of Jerry’s post acquisition reserves.
Have you watched our free lectures on consolidations?
145 P Co acquired 80% of the ordinary shares of S Co several years ago During the year ended 31 March-20X7, S. Co made a profit after tax of S25,000. During the year ended 31 March 20X7 S Co sold goods top co for S900, which included a mark-up of 50%, At the reporting date only onethird of those goods had been sold by P Co.
What was the non-controlling interest share of the consolidated
profit after tax for the year ended 31 March 20X7?I know the answer is 25000×20% – (20% of 200)
= 4960But I don’t get it why didn’t we deduct 900 from 25000(intra-group trading ) which it sold to parent.
No, all we need to subtract is the amount of the unrealized profit that is included in C’s reported profit.
Have you watched my free lectures on consolidated profit statements where this is explained?
.. I’ve watched those lectures from YouTube, almost all of them…. May be I didn’t understand even from YouTube . -_-
..if we didn’t deduct intra group trading when finding out profit attributable to NCI doesn’t that mean NCI is claiming the part of sales profit that S made by selling to P. BUT SINCE IT ESSENTIALLY JUST MEANS THAT WE’RE PUTTING ITEMS FROM ONE POCKET TO ANOTHER ,WE SHOULD DEDUCT SALES REVENUE FROM S (P WILL DEDUCT FROM PURCHASE IN COGS)
WHY DIDN’T WE DEDUCT SALES REVENUE OF 900 FROM S.
May be the entire formula for finding out profit attributable to NCI is wrong and nobody noticed it.
Instead of : NCI% × profit after tax of subsidiary – PURP × NCI%
It should be : NCI% × ( Profit after tax of subsidiary- intra group trading) – PURP × NCI%.
OMGGGG.. I’M SOOO SMART. ^ _ ^
Can u please replay sir.. I think I didn’t post my message by clicking on that ‘Reply’ button. Maybe u didn’t get my message ^ _ ^
Please do not keep posting like this – we do not sit at the computer 24 hours a day but I always answer within the day.
You write that you have watched the lectures but as is explained in the lectures the amount of the intra-group sales is not relevant – the sales from one company are the cost to the other company.
All that is relevant is the unrealized profit, which is the profit on those goods that remain in inventory.
- The topic ‘Consolidated financial statements’ is closed to new replies.