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During the year, Plank Co also sold goods to Arch Co for $26m, all of which Arch Co held in inventory at 31 December 20X8. All of these goods had a mark?up on cost of 30%.
Calculate the carrying amount of the investment in Arch Co in the consolidated
statement of financial position of Plank Co as at 31 December 20X8.ANS
Investment in Associate
$000
Carrying amount of investment at 31 December 20X7 145,000
Income from associate (W2) 30,300
Dividend received (W4) (12,250)
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Carrying amount at 31 December 20X8 163,050Good day,Please I don’t understand why the PUP wasn’t removed from the value of investment in associate. I’ll aooreciate if you can explain better.
Hi,
In this scenario the direction of the sale is from the group (parent) to the associate. If this is the case then the profit has been made by the group and the inventory is held within the associate and the adjustment is to DR Retained earnings CR Investment in associate. Therefore it looks like an adjustment should have been made to the investment in associate in this question. If you are taking this question from an older version of the materials you are using then there might have been updates to the accounting treatment since this was published.
Thanks
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