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Hi sir, for september 2016 exam question 10 of the MCQ question.
In the answer key they have added [(800-600 × 30%)] = 60 000 to the inventory figures.
Isn’t this the unrealised profit , and usually this will be minus off from the inventory figures. Why is it different here? Could you explain sir ?
“Isn’t this the unrealised profit”
NO! It’s the fair value adjustment. That inventory should have been fair valued as at date of acquisition. In the working W2 for Goodwill, that 200 fair value difference will have been included as part of the fair value of the subsidiary’s net assets as at the date of acquisition … and 25% of that fair value adjustment is still in the ownership / possession of the subsidiary
OK?
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