Sand Co acquired 80% of the equity share capital of Sun Co several years ago. In the year to 31 December 2014, Sand Co made a profit after taxation of $625,000 and Sun Co made a profit after taxation of $25,000. During the year Sun Co sold goods to Sand Co at a price of $21,000. the profit mark-up was 40% on the sale price. At 31 December 2014, 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 profit or loss of the Sand Group for the year to 31 December 2014?
Suggested solutions:
| $ | |
| Sun company Profit after taxation | 25,000 |
| Unrealised Profit Intra company sale | (2,100) |
| Adjusted Sun company Profit after taxation | 22,900 |
| Sand Co share of adjusted profit from Sun (80%) | 18,320 |
| Sand Co profit after taxation | 625,000 |
| Answer: | 643,320 |
Working on unrealised profit
=Sale X profit margin X pertage unsold
=21,000 X 0.4 X 0.25
=$2,100
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2015 ACCA F3 ATTRIBUTABLE PROFIT