ACCA FR · Chapter 13 · Question 3 of 11
Hyena Co acquired 70% of Jackal Co on 1 April. Jackal Co's profit after tax for the year ended 31 December was $2,400,000, earned evenly. A fair value uplift on plant causes extra depreciation of $40,000 a year. Jackal Co sold goods to Hyena Co after acquisition, giving unrealised profit of $20,000 at the year end. Goodwill impairment for the year is $100,000, and NCI is measured at fair value. What is the profit attributable to NCI?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) $495,000
Explanation
Post-acquisition profit = $2,400,000 x 9/12 = $1,800,000. Adjustments: extra depreciation $40,000 x 9/12 = $30,000, unrealised profit (subsidiary was seller) $20,000, and goodwill impairment $100,000, which is shared with NCI under the fair value method. Adjusted profit = $1,800,000 - $30,000 - $20,000 - $100,000 = $1,650,000. NCI = 30% x $1,650,000 = $495,000.
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