ACCA FR Syllabus D. Preparation Of Financial Statements - Unrealised Profit - Past Papers ^{1 / 3}

Rooney Co acquired 70% of the equity share capital of Marek Co, its only subsidiary, on 1 January 20X6.

The fair value of the non-controlling interest in Marek Co at acquisition was $1·1m.

At that date the fair values of Marek Co’s net assets were equal to their carrying amounts, except for a building which had a fair value of $1·5m above its carrying amount and 30 years remaining useful life.

During the year to 31 December 20X6, Marek Co sold goods to Rooney Co, giving rise to an unrealised profit in
inventory of $550,000 at the year end.

Marek Co’s profit after tax for the year ended 31 December 20X6 was $3·2m.

What amount will be presented as the non-controlling interest in the consolidated statement of financial position
of Rooney Co as at 31 December 20X6?

A     $1,895,000
B     $1,495,000
C     $1,910,000
D     $1,880,000

A parent company sells goods to its 80% owned subsidiary during the financial year, some of which remains in inventory at the year end.

What is the adjustment required in the consolidated statement of financial position to eliminate any unrealised profit in inventory?

Under certain circumstances, profits made on transactions between members of a group need to be eliminated from
the consolidated financial statements under IFRS.

Which of the following statements about intra-group profits in consolidated financial statements is/are correct?

A     (i) only
B     (i) and (ii)
C     (ii) and (iii)
D     (iii) only

Consolidated financial statements are presented on the basis that the companies within the group are treated as if they are a single (economic) entity.

Which of the following are requirements of preparing group accounts?

A      All four
B      (i) and (ii) only
C      (i), (iii) and (iv)
D      (iii) and (iv)