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  1. Hi
    How the PUP was calculated?
    It is 14000+(40% of 14000=5600)? then the sales would have gone to 19600.
    but if the profit is included in 14000 then the PUP would not be matching with yours.
    Please assist Thanks

    • The sale of $14,000 is inclusive of the 40% gross profit

      So profit on the sale is 40% x $14,000 = $5,600 and one third is still in inventory = $1,867

      You have made an enormous error!

      If the sale of $14,000 was the cost of the goods and the sale was at a gross profit of 40%, then $14,000 would represent 60% of the sale price and the profit would then have been $9,333

      That gives a total sale value of $23,333 and 40% of that is $9,333

      But that’s if the $14,000 were before the profit element

      It isn’t – $14,000 is inclusive of the profit

    • Look at / watch the lectures and particularly watch the lecture that covers working W3 (for statement of financial position) and working W4B (nci share of this year’s subsidiary profit after tax)

      Then, if you’re still not sure, post again

  4. Hello Mr Little,

    You said that in W3, our share of the 10,000 dividend is already included, which makes sense. But how is this dividend also included in CS of P&L, as we ignored the dividend received from subsidiary. Why don’t we include our share there?

    • Because we include 100% of the subsidiary (time-apportioned if applicable) and it’s out of those 100% of subsidiary profits that the subsidiary is declaring its dividend.

      Ie, they’re already consolidated within the Consolidated Statement of Income

  5. Dear Mr. Little

    Thank you for your lectures!!! They are so helpful.

    Do we have to do W3 Cons Ret Ears, when calculating the Consolidated Statement of Comprehensive Income, or is this just an additional calculation (for myself) to see if my CSofCI calculation is correct? If I do not have to calculate W3 I would rather not do so, because of timings.

    Thank you & many blessings to you!

  7. Hello

    May I ask why do we adjust all the intra group inventory sale (14,000) instead of the left over after the further (extra group sale of 2/3) which is 1/3? Hence, 4,667 instead of 14,000. The result is the same since one offsets the other but which is the right one?

    By the way….there are various ways of reading F in the RTFQ… I had a great laugh..hahaha..cheers!

    • @chrispantazis, I’m not sure exactly what you mean about the “F” – it is the abbreviation for “full”

      Cancellation of the intra-group sale IN FULL is the correct way. Look on it as two separate adjustments to make :-

      a) cancel the intra-group transaction in full ( otherwise you’re showing me selling to myself and buying goods from myself, neither of which makes ANY sense at all )

      b) adjust for the intra-group pup in closing inventory

      Clear?

      • @MikeLittle, I thought the F was for “Freaking” as Mitt Romney might have said….or people from the 50s….hahaha..

        I understand the logic but as at year end within the group as a whole we are overstating revenue and cost of sales of the selling entity by what is left after sales outside the group. If I sell 10 to my wife and she sells 8 of those outside the household then when we merge our accounts at Xmas the Family revenue will be overstated by (10-8) 2 (my revenue) and so is cost of sales (my wife’s). If she sold to our son then that is a different story…(pup duplication) I do not understand what I am missing but I cannot get my head around using the full sale since some or all of it has been sold outside the group….
        I take your word for it though and will proceed with the full sale…
        Thank you

      • @chrispantazis, Ok, here we go!

        I buy 10,000 goods – double entry, Dr Purchases Cr Cash

        I sell all these goods to my subsidiary for 12,000 Dr Cash Cr Revenue

        AND

        In the subsidiary’s records Dr Purchases Cr Cash 12,000

        The subsidiary sell all of these goods for 15,000 Dr Cash Cr Revenue

        Now, can you see that the same goods are included in Revenue twice – once in my records at 12,000 and again in the subsidiary revenue at 15,000.

        Also, they are included twice in Purchases – once in my records at 10,000 and also in the subsidiary’s records at 12,000

        Surely these goods are only bought from outside by the group ONCE and only sold outside the group ONCE

        So we need to eliminate the FULL intra-group transaction by reducing Revenue and Purchases ( Cost of Sales ) by the value of the intra-group transaction

        When we do that, we are left with one Purchases 10,000 and one Revenue 15,000

        Better?

    • @serina1800, Hello,
      If you count (use your fingers) from 01/06/08 to 31/05/09 you will see that it is 12 months hence 1 full (financial) year. If you were to apportion it would be 12/12 which is one. So you do not need to time apportion.

      • @chrispantazis, Thank you so much for your reply, that’s right. i didn’t pay good attention to date as i read 31may and i calculate for 31 march. My silly mistake!

    • @serina1800, @serina1800, sorry for the instructive tone (below)…I hope my answer helps you…. it would be 10/12 if the purchase was on 31 July 2008 or 1 August 2008…. I have screwed up many times during the solution because I did not pay good attention to the dates….
      Good Luck…

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