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(iii) Offspring sold Parentis goods for $15 million in the post acquisition period. $5 million of these goods are included
in the inventory of Parentis at 31 March 2007. The profit made by Offspring on these sales was $6 million.
Offspring’s trade payable account (in the records of Parentis) of $7 million does not agree with Parentis’s trade
receivable account (in the records of Offspring) due to cash in transit of $4 million paid by Parentis.please explain to me how to solve this part.thanks a lot!
In transit items are a different problem that the pup on the unsold stock. calculate the pup needed – 2million – and adjust in the seller’s records. The cash in transit – accelerate the cash into the records of the receiving company. So, debit cash and credit the current account
When you have adjusted for the 4m cash in transit, the current accounts now agree. So cancel the receivable against the payable. In Offspring’s accounts / records, it looks like they have not yet received the 4m. So, in Offspring, debit cash and credit the Parentis Current account. Now they agree at a figure of 3m. So reduce the receivables and the payables ( when adding across these figures ) by the 3m which you are cancelling
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