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Dear John sir,please consider the following question.
X co acquired 80% of Y in 31july.year ended 30september.on 30 th September revenue&cost of sales of x were £3400 and £1500.for y sales &cost of sales were £2400 &£1800.during the year ended in 30th September y sold goods to x,for £5 each month at a mark up of 25%.at year end x co had 50% of these goods in inventory.what is the group’s gross profit? Sir plz walk me through this toughee.X owned their share of & for 2 months (August and September).
Revenue = 3,400 + (2/12 x 2,400) – (2 x $5) = 3,790
(the 2 x $5 is to remove the intra-group sales)Cost of sales = 1,500 + (2/12 x 1,800) – (2 x $5) + (50% x 2 x $1) = 1,791
(again, the 2 x $5 is to remove the intra-group sales. The (50% x 2 x $1) is the PURP. The items are sold intra-group at $5 so the profit is 25/125 x $5 = $1 per month, and 50% of the 2 months sales are still in inventory).So the profit = 3,790 – 1,791 = 1,999
(Surely the book in which you found the question also provides an answer? 🙂 )
Thank you sir.your answer is same as the book but it is not explained in the book step by step.so thank you very much sir.
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