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Hi there,
I have 2 MCQs on the BPP kit and I don’t know if the solutions are right or if I am wrong.
Q. Ruby Co owns 30% of Emerald Co and exercises significant influence over it. Emerald Co sold goods to Ruby for $160,000. Emerald Co applies a 1/3 mark up on cost. Ruby Co still had 25% of these goods in inventory at year end. What amount should be deducted from consolidated retained earnings in respect of this transaction?
A. ($160,000/4)*25%*30%=$3000
Q. Extracts from Deltoid Cos SOFP are as follows:
20X1 20X2 ($’000)
Non Current assets
Right of use asset 6500 2500
Non Current liab.
lease obligations 4800 2000
Current liab.
lease obligations 1700 800During the year to 31 March 20X1 depreciation charged on leased plant was $1,800,000
What amount will be shown in the Statment of cash flows of Deltoid Co for the year ended 31 March 20X1 in respect of payments under leases?
$’000
A. b/f (20009+800) 2800
Additions (6500-2500+1800) 5800
Payments made (B) (2100)
c/f (4800+17000 6500Can you please explain the logic behind the answers, I don’t understand the first one and the 2nd one is adding depreciation on to the right of use asset instead of taking it away.
Thanks a mill
ElizaThe c/f at the end of the 2nd question should be (4800 + 1700) 6500
Kind regards,
ElizaQ. Ruby Co owns 30% of Emerald Co and exercises significant influence over it. Emerald Co sold goods to Ruby for $160,000. Emerald Co applies a 1/3 mark up on cost. Ruby Co still had 25% of these goods in inventory at year end. What amount should be deducted from consolidated retained earnings in respect of this transaction?
A. ($160,000/4)*25%*30%=$3000
We calculate the PUP in the usual fashion and then record our share of it at 30%.
25% of goods are in inventory and so we take 25% of the $160,000, which gives $40,000.
There is a mark-up of 1/3 on cost and so the sales will be at 4/3 (i.e. 3/3 cost + 1/3 profit). If we do 1/3 / 4/3 (i.e. 1/4) of the $40,000 we get $10,000.
Our 30% share is the $3,000. The complex part I think is the mark up as we very rarely (if ever) see it given as a fraction. If it is any easier then the 1/3 mark up can be treated as a 33.3333333% mark up.
Hope that help.
Thanks
Q. Extracts from Deltoid Cos SOFP are as follows:
20X1 20X2 ($’000)
Non Current assets
Right of use asset 6500 2500
Non Current liab.
lease obligations 4800 2000
Current liab.
lease obligations 1700 800During the year to 31 March 20X1 depreciation charged on leased plant was $1,800,000
What amount will be shown in the Statment of cash flows of Deltoid Co for the year ended 31 March 20X1 in respect of payments under leases?
$’000
A. b/f (20009+800) 2800
Additions (6500-2500+1800) 5800
Payments made (B) (2100)
c/f (4800+17000 6500The depreciation is a non-cash item and so is added back to the value of the right of use asset.
Thanks
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