The Following Information Relates to Questions 22 to 24

question 1

Multiple Choice

The following information relates to questions 22 to 24
Jacaranda Limited acquired a 75% ownership interest in Frangipani Limited on 30 June 2014. On the same day, Frangipani Limited acquired a 60% ownership interest in Gardener Limited. The following interentity transactions have taken place between the entities in the group during the years ended 30 June 2014 and 30 June 2015:
On 1 July 2013 Gardener sold an item of plant to Jacaranda for a profit of $25 000. The remaining useful life of the plant at the date of transfer was 2 years.
On 1 September 2013, Gardener paid a dividend of $100 000 from profits earned prior to 30 June 2013.
Jacaranda lent $500 000 to Gardener on 1 January 2014. Interest charged on the loan for the year ended 30 June 2014 was $20 000 and for the year ended 30 June 2015 was $40 000.
On 31 May 2014 Frangipani sold inventory to Gardener for $15 000. Profit earned on the sale was $1500. Gardener sold the inventory to external parties on 1 August 2014.
Details of profits earned by entities within the group for the years ended 30 June 2014 and 30 June 2015 are:
The tax rate is 30%.
-The NCI share of profit in the Frangipani group for the year ended 30 June 2014 is:

• A) $14 812.50
• B) $15 487.50
• C) $17 175.00
• D) $21 987.50

---

Definitions:

Natural Monopoly

A market condition where due to high infrastructure costs or significant barriers to entry, a single company can supply a product or service more efficiently than any potential competitor.

Economic Profit

The difference between total revenue and total costs, including both explicit and implicit costs, reflecting the true financial gain of a business.

Price Discrimination

A pricing strategy where a seller charges different prices for the same product or service to different customers, not based on differences in costs.

Marginal Cost

The additional expense incurred from producing another unit of a product.