Consolidated SOPL

Question

Sand Co acquired 80% of the equity share capital of Sun co. several years ago. In the year to 31st Dec 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 markup was 40 per cent on the sales price. At 31st December, 20X4, 25 percent of these goods were still held in the inventory of Sand Co.

Calculate the profit attributable to parent company in the consolidated SOPL of sand group for year ended 31st December 20X4.

This is a question from BPP revision kit. (26.23)

My confusion is

a) If we have the individual PAT figures for subsidiary company and parent company, it is assumed that they are adjusted already for intragroup item mentioned in the question (sale of goods to Sand Co). That’s what I think. The PAT figures need to be added and NCI PAT needs to be subtracted. That’s it. But that’s not how solution goes.

Why are we adjusting PAT for intragroup sale? Isn’t cost of sales and sales revenue already adjusted?

2) if Sun co sells at price of $40,000 and there is a profit markup of 40% then

Sales 40000 $ (140%)
Less: cost of sales (28571.4 $) 100%

_______________________________

profit (40%) 11428.6$

But the solution considers sales to be 100 % and profit is only 40 percent of sales figure. Isn’t this incorrect? My understanding is that markup means profit is a percentage of cost. Cost would be taken 100%.

Please do respond. I have my exam in three days.

Thank you.