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Jelly Co purchased 90% of candy Co on 1 January 20X8. During the year ended 31 December 20X8, candy Co sold goods to jelly Co for $16m at a mark-up of 25%. Jelly Co has 40% of these goods left in inventory at 31 December 20X8.
Identify the total unrealised profit and how this should be adjusted in the consolidated statement of profit or loss for the year ended 31 December 20X8.So the answer mentioned is 1.28 million of unrealised profit and deduct from consolidated cost of sales, aren’t we supposed to add 1.28 million to cost of sales rather than deduct?
Yes, the journal entry for the PURP is to debit cost of sales, which will increase the cost of sales figure.
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