Question 1

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 Provision for Unrealized Profit (PUP) that must be eliminated from consolidated inventory. (Enter numbers only)

Accepted Answer

Multiply the total profit on the intra-group sale by the fraction of goods still in inventory.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Eliminating the full $16,000 profit, forgetting that half the goods were sold to third parties.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA FA — Financial Accounting Practice Exam 2

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