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PUP

Forums › ACCA Forums › ACCA FA Financial Accounting Forums › PUP

  • This topic has 1 reply, 2 voices, and was last updated 10 years ago by John Moffat.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • August 30, 2014 at 11:34 am #193036
    Vicki
    Member
    • Topics: 20
    • Replies: 33
    • ☆☆

    Sand co acquired 80% of equity share capital of Sun co several years ago. in the year to 31/12/x4 sand co made a profit after tax of £120000 and Sun co made a profit after tax of £35000. During the year sun co sold goods to Sand co at a price of £40000. The profit mark up was 40% on the sales price. At 31/12/x4, 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 P&L of the Sand group for the year to 31/12/x4.

    My answer was £144000 based on the following:

    100% Sand = £120000
    80% Sun = £28000
    Less PUP = (£4000)
    Total = £144000

    PUP Working: £40000 x 40% = £16000 profit
    £16000 x 25% in inventory = £4000

    The actual answer is £144800 so I am missing where the £800 has come from, but I thought I had dealt with everything, please can someone explain?

    August 30, 2014 at 11:49 am #193038
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54702
    • ☆☆☆☆☆

    It is Sun who sold the goods to Sand, and so the unrealised profit of $4000 is included in Sun’s profits.
    So when consolidating, the $4000 needs removing from Sun’s profit.

    So the profit attributable to Sand, the parent, is:

    100% Sand = $120,000
    80% Sun = 80% x (35000 – 4000) = $24,800

    So total = $144,800

    Hope that helps 🙂

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    Posts
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