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Hello sir,
I read your answers about how, if we deduct the entire PUP amount from the associate’s share of profit, we get the right answer.
I tried to solve it that way but I’m not sure I got it.The parent was the seller, so retained earnings is adjusted in (W5)
Dr Retained earnings $1,000
Cr Inventories $1,000This extract is from Kaplan, and although the parent is the seller, they credited Inventory.
Is the debit and credit matching all we need to take care of?Also, we only remove the unrealised element from the profits. What if P sold goods to A and A had sold all those good on to the customer by year end?
Would it be alright to have P earn profits this way? Selling goods to an entity they have significant influence over.
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