ACCA FR · Chapter 13 · Question 11 of 11
For the year, parent Bongo Co's profit after tax was $5,000,000, including a $400,000 dividend from its 80% subsidiary. The subsidiary's profit after tax was $2,000,000, all post-acquisition. Adjustments are: unrealised profit on goods sold by the parent to the subsidiary $60,000; extra depreciation on the subsidiary's fair value uplift $50,000; and goodwill impairment $100,000, with NCI measured at fair value. What profit is attributable to the owners of the parent?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) $6,020,000
Explanation
Consolidated profit = $5,000,000 - intra-group dividend $400,000 + $2,000,000 - unrealised profit $60,000 - extra depreciation $50,000 - impairment $100,000 = $6,390,000. NCI = 20% x ($2,000,000 - $50,000 - $100,000) = $370,000. The unrealised profit is not charged to NCI because the parent was the seller. Owners of the parent = $6,390,000 - $370,000 = $6,020,000.
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