ExpertMedium1 markShort Answer
ACCA · Question 42 · 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.
Calculate the total profit made by TechNova on the intra-group sale of $80,000. (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.
Calculate the total profit made by TechNova on the intra-group sale of $80,000. (Enter numbers only)
How to approach this question
Use the mark-up formula: Profit = Sales * (Mark-up / (100 + Mark-up)).
Full Answer
The goods were sold at a 25% mark-up on cost. Therefore, Sales = 125%. Profit = $80,000 * (25 / 125) = $16,000.
Common mistakes
Calculating 25% of $80,000 ($20,000), which is margin, not mark-up.
Practice the full ACCA FA — Financial Accounting Practice Exam 2
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