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What will be the effect of the new product on the following ratios of HJ? 

 

Operating profit margin 

Return on capital employed 

A Decrease 

Decrease 

B Decrease 

Increase 

C Increase 

Decrease 

D Increase 

Increase 

(2 marks) 

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           PRACTICE QUESTION BANK 

 

510

 

100  Jessica Co acquired 75% of the share capital of Patpost Co on 1 January 20X7. The draft 

statements of profit or loss for the two companies for the year ended 31 December 20X7 are 

shown below.  

 

 Jessica Co 

 Patpost Co 

 

 $m 

 $m 

Revenue 

 7,500 

 3,000 

Cost of sales 

 4,000 

 1,600 

 

 3,500 

 1,400 

Operating expenses 

 2,000 

 500 

Profit before tax 

 1,500 

 900 

Tax 

    300 

 120 

Profit for the year 

 1,200 

 780 

 

 

 

During the year, Jessica Co sold goods costing $3m to Patpost Co for $5m. At the year end, 

50% of these goods remained in Patpost's inventory. 

(a) 

Prepare the Jessica Group's statement of profit or loss for the year ended 

31 December 20X7.  

 (8 marks) 

(b) 

The profit attributable to the equity owners of Jessica amounted to $                 (3 marks) 

(c) 

Jessica's current ratio increased from 0.7 at 31 December 20X6 to 1.5 at 31 December 

20X7. The company sells goods at a mark-up of 25% on cost.