ExpertACCA · Question 41 · Preparing simple consolidated financial statements
Section B - Case 1: Group Consolidations
Scenario: On 1 January 20X5, Zenith Heavy Industries acquired 80% of the equity share capital of Apex Robotics for $2,500,000. At the date of acquisition, the fair value of Apex's net assets was $2,000,000. Zenith measures the Non-Controlling Interest (NCI) at fair value, which was $550,000 at the acquisition date. During the year ended 31 December 20X5, Zenith sold goods to Apex for $400,000 at a mark-up of 25%. Half of these goods remain in Apex's inventory at year-end. At 31 December 20X5, Zenith's retained earnings are $5,000,000. Apex's retained earnings were $1,000,000 at acquisition and $1,500,000 at year-end.
How is the Provision for Unrealized Profit (PUP) accounted for in the consolidated statement of financial position?
Section B - Case 1: Group Consolidations
Scenario: On 1 January 20X5, Zenith Heavy Industries acquired 80% of the equity share capital of Apex Robotics for $2,500,000. At the date of acquisition, the fair value of Apex's net assets was $2,000,000. Zenith measures the Non-Controlling Interest (NCI) at fair value, which was $550,000 at the acquisition date. During the year ended 31 December 20X5, Zenith sold goods to Apex for $400,000 at a mark-up of 25%. Half of these goods remain in Apex's inventory at year-end. At 31 December 20X5, Zenith's retained earnings are $5,000,000. Apex's retained earnings were $1,000,000 at acquisition and $1,500,000 at year-end.
How is the Provision for Unrealized Profit (PUP) accounted for in the consolidated statement of financial position?
Answer options:
Added to consolidated inventory and deducted from the parent's retained earnings
Deducted from consolidated inventory and deducted from the parent's retained earnings
Deducted from consolidated inventory and deducted from the subsidiary's retained earnings
Deducted from consolidated payables and deducted from consolidated receivables
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