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Consolidated IS

Forums › ACCA Forums › ACCA FA Financial Accounting Forums › Consolidated IS

  • This topic has 0 replies, 1 voice, and was last updated 11 years ago by Andreea.
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  • November 14, 2013 at 10:57 am #145967
    Andreea
    Member
    • Topics: 6
    • Replies: 6
    • ☆

    Hello,

    I am a bit confused about an exercise and it would be very helpful if someone can explain where I make mistakes. The problem goes like this:
    ” Tin Co acquired 90% of the equity share capital of Drum Co on 1 April 20×3. The following info relates to the financial year to 31 Dec 20×3 for each company.

    Retained earnings at 1 Jan 20×3 840000(Tin co). 170000(Drum co)
    Profit for the year. 70000. 60000
    Ret earnings at 31 Dec 20×3. 910000. 230000

    Neither co. paid dividends during the year. What profit is attributable to the parent co in the consolidated IS of Tin Group for the year to 31 dec 20×3?

    I solved it like this:

    Profit on consolidation: 130000

    Profit attributable to:
    – parent. 124000
    -NCI. 10% x 60000= 6000

    Movement in ret earn
    Ret earn(parent): 840000
    Post-aquisition earn: 90%x9/12×60000=40500
    => ret earn: 840000+40500+124000=1004500.

    However, we are only interested in the consolidated profit. Therefore, we take 124000 and add to it 40500? But even so, I do not get the right answer.
    The book only takes the 70000 profit of the parent and adds 40500- and I do not understand why- aren’t we supposed to add the profits for consolidation and afterwards appoint a proportion to each co?

    Thank you!

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