Paprika Co purchased 75% of the equity share capital of Salt Co on 30 April 20X4. Non-controlling interest
are measured at fair value.
The cost of sales of both companies for the year ended 30 April 20X6 are as follow
Cost of sales
Paprika
Salt
$
100,000
60,000
The following information is provided:
(1)
Salt Co had machinery included in its net assets at acquisition with a carrying amount of $120,000 but a fair
value of $200,000. The machinery had a remaining useful life of eight years at the date of acquisition. All
depreciation is charged to cost of sales
During the year, Salt Co sold some goods to Paprika Co for $32,000 at a margin of 25%. Three quarters of
these goods remained in inventory at year end.
What is the cost of sales in Paprika Co's consolidated statement of profit or loss for the year ended 30
April 20X6?
$144,000
$132,000
$176,000
$140,000
Answer
A
$144,000
Consolidated cost of sales:
Paprika 60000
Salt 100000
Additional depreciation for year (200,000-120,000)/8 = 10000
Unrealised profit in inventory (32,000 x 25%)= $8,000x 3/4
Less: Intragroup sales sold by Salt Co to Paprika Cooaevn 0o
(32,000)=
144,000
I have a problem with this part
Additional depreciation for year (200,000-120,000)/8 = 10000
The question asks for the cost of sales for the year ended 30 April 20X6 and the purchase of shares occurred on 30 April 20X4. So two years passed. So I put additional depreciation to be 20000.