Chapter 23
KAPLAN PUBLISHING
505
3
P Co and S Co
The statements of profit or loss of two entities, P Co and S Co, for the year
ended 31 December 20X3 are presented below:
P Co
S Co
$000 $000
Revenue
950
424
Cost of sales
(400)
(152)
–––––
–––––
Gross profit
550
272
Administrative expenses
(200)
(120)
–––––
–––––
Operating profit
350
152
Investment income
60
20
Finance costs
–
(8)
–––––
–––––
Profit before tax
410
164
Income tax
(100)
(32)
–––––
–––––
Profit after tax for the year
310
132
––––– –––––
The following notes are relevant to the preparation of the consolidated
financial statements:
(i)
P Co acquired 80% of the ordinary shares in S Co on 1 October
20X3.
(ii)
During the post-acquisition period, S Co sold goods to P Co for
$50,000 making a gross profit margin of 20%. Forty per cent of these
goods remained in the inventory of P Co at the year end.
PRACTICE QUESTIONS
506
KAPLAN PUBLISHING
Task 1
Complete the following consolidated statement of profit or loss for
the P Co group for the year ended 31 December 20X3
(10 marks)
$000
Revenue
Cost of sales
Item 1
Add/Subtract*
–––––
Gross profit
N/A
Administrative expenses
Add/Subtract*
–––––
Operating profit
N/A
Investment income
Add/Subtract*
Finance costs
Add/Subtract*
–––––
Profit before taxation
N/A
Income tax
Add/Subtract*
–––––
Profit after tax for the year
N/A
–––––
Profit after tax attributable to:
Owners of P Co
N/A
Non-controlling interest
Item 2
–––––
N/A
–––––
Note:
* = delete which does not apply
Item 1
– Choose the correct calculation for cost of sales
All figures are in $000
Selected
answer
(i)
($400 + (9/12 × $152) – $50 + $4
(ii)
($400 + (3/12 × $152) + $50 – $4
(iii)
($400 + (3/12 × $152) – $50 + $4
Chapter 23
KAPLAN PUBLISHING
507
Item 2
– Choose the correct calculation for the non-controlling interest
share of the consolidated profit for the year
Selected
answer
(i)
(3/12 × 20% × $132) – ($50 × 20% × 40%)
(ii)
(3/12 × 20% × $132) – ($50 × 20% × 40% × 20%)
(iii)
(9/12 × 20% × $132) – ($50 × 20% × 40% × 20%)
Task 2
P Co is considering the purchase of a shareholding in another entity and, if
purchased, this investment would meet the definition of an associate.
Complete the following statement to explain what an interest in an
associate is.
(2 marks)
An interest in an associate would normally be indicated by a owning a
shareholding in that entity of up to 20%/between 20% and 50%*. An
interest in an associate is normally characterised by being able to exercise
control/ significant influence* over the strategic and operating decisions in
that entity.
* delete which does not apply
Task 3
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