ExpertMedium2 marksMultiple Choice
ACCA · Question 09 · Preparing Simple Consolidated Financial Statements
Section A
Oceanic Shipping PLC acquired 75% of the ordinary share capital of Marine Logistics Ltd on 1 September 20X4. Marine Logistics Ltd's profit for the year ended 31 December 20X4 was $1,200,000, accruing evenly throughout the year. What amount of Marine Logistics Ltd's profit should be included in the consolidated statement of profit or loss for the year ended 31 December 20X4?
Section A
Oceanic Shipping PLC acquired 75% of the ordinary share capital of Marine Logistics Ltd on 1 September 20X4. Marine Logistics Ltd's profit for the year ended 31 December 20X4 was $1,200,000, accruing evenly throughout the year. What amount of Marine Logistics Ltd's profit should be included in the consolidated statement of profit or loss for the year ended 31 December 20X4?
Answer options:
A.
$1,200,000
B.
$900,000
C.
$400,000
D.
$300,000
How to approach this question
Determine the number of months the subsidiary was owned during the year (Sept to Dec = 4 months). Time apportion the full year profit: $1,200,000 * 4/12. Remember, consolidated P&L includes 100% of the subsidiary's post-acquisition line items.
Full Answer
C.$400,000✓ Correct
In a consolidated statement of profit or loss, 100% of the subsidiary's post-acquisition income and expenses are included, regardless of the parent's ownership percentage (the NCI share is adjusted at the bottom of the statement). Since it was acquired on 1 September, it was owned for 4 months. $1,200,000 * 4/12 = $400,000.
Common mistakes
Multiplying the time-apportioned profit by the ownership percentage (75%).
Practice the full ACCA FA — Financial Accounting Practice Exam 6
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