For the year ended 31 December 20X1, B Ltd reported a profit of $1 000 000; and B Ltd's 90-per-cent-owned subsidiary, C Ltd, reported a profit of $500 000.The only intra-group transaction during the year was a sale of inventory from C Ltd to B Ltd at a profit of $100 000.All of this inventory is unsold at 31 December 20X1.What is the formula to correctly calculate the NCI share of C Ltd's profit for this year?
A)$500 000 x 10%
B)$400 000 x 90%
C)$400 000 x 10%
D)$500 000 x 90%

Question

Quizplus · Accepted Answer

To calculate the non-controlling interest (NCI) share of C Ltd's profit, we first need to calculate the profit attributable to the parent company, B Ltd. This is done by eliminating the intra-group profit on inventory sales. So, B Ltd's profit will be $1,000,000 - $100,000 = $900,000.
Next, we calculate the profit attributable to the NCI. This is done by multiplying C Ltd's profit before intra-group sales by the NCI percentage. C Ltd's profit before intra-group sales is $500,000, and the NCI percentage is 10% (as B Ltd owns 90% of C Ltd). So, the NCI share of C Ltd's profit is $500,000 x 10% = $50,000.
Therefore, the correct answer is C.

For the Year Ended 31 December 20X1, B Ltd Reported