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Are recoverable and payables always affected by intra group trading ? I have a question in Kaplan text where on consolidation the receivables and payables are added on a straight line basis without reduction for intra group trading of £8000. It’s a question regarding mid year acquisition. Acquired may 20×7 , statement 30 nov 20×7 and on 30 nov 20×7 the inventory of sub included goods purchased at a cost of 8000 from k at cost plus 25%. None of the goods had been sold on by s by the reporting date.
ThanksIf at the end of the year there is money owing from one of the companies to the other, then the total receivables and total payables should both be reduced by the amount owing (but only if it was owing at the end of the year).
As far as inventory is concerned, if there is any inventory at the end of the year that was sold from one of the companies to the other, then the unrealised profit in the inventory is subtracted from the profits (and therefore the retained earnings) of the company that sold the inventory to the other company. This is completely separate from any monies owing from one company to the other.
Sir in example no.7
P acquired 75% of the share capital of S on its incorporation. The Statements of Financial Position
of the two entities as at 31 December 2010 are as follows:
P S
Non-current assets 50,000 25,000
Investment in S, at cost 15,000
Inventory 13,000 7,000
Other current assets 10,000 6,000
88,000 38,000
Share capital – $1 shares 45,000 20,000
Retained earnings 30,000 15,000
Current liabilities 13,000 3,000
88,000 38,000
During December 2010 S had sold goods to P for $6,000. S sells to P at cost plus 25%.
P had not sold any of these goods and all were therefore included in inventory.
Additionally, P had not paid S for these goods and therefore the sum of $6,000 is included in P’s
payables and in S’s receivables.
Prepare a Consolidated Statement of Financial Position at 31 December 2010.Sir how to do goodwill on acquisitions of subsidiary in this sum??
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