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ACCA · Question 41 · Preparing simple consolidated financial statements
Scenario: TechNova PLC acquired 80% of CyberNetix Ltd on 1 Jan 20X5 for $500,000 cash. At acquisition, CyberNetix's retained earnings were $200,000 and share capital was $100,000. NCI fair value at acquisition was $120,000. During 20X5, TechNova sold goods to CyberNetix for $80,000 (25% mark-up on cost). Half remained in inventory at year-end (31 Dec 20X5). CyberNetix's 20X5 profit was $150,000.
What amount must be deducted from consolidated revenue and consolidated cost of sales to eliminate the intra-group trading? (Enter numbers only)
Scenario: TechNova PLC acquired 80% of CyberNetix Ltd on 1 Jan 20X5 for $500,000 cash. At acquisition, CyberNetix's retained earnings were $200,000 and share capital was $100,000. NCI fair value at acquisition was $120,000. During 20X5, TechNova sold goods to CyberNetix for $80,000 (25% mark-up on cost). Half remained in inventory at year-end (31 Dec 20X5). CyberNetix's 20X5 profit was $150,000.
What amount must be deducted from consolidated revenue and consolidated cost of sales to eliminate the intra-group trading? (Enter numbers only)
How to approach this question
Identify the total sales value of the goods transferred between the parent and subsidiary.
Full Answer
The total value of the intra-group sales was $80,000. This entire amount must be eliminated from both consolidated revenue and consolidated cost of sales to avoid double counting.
Common mistakes
Eliminating only the profit element or only the goods remaining in inventory.
Practice the full ACCA FA — Financial Accounting Practice Exam 2
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