[yuska]

passed with 68%

thanks dear tutors and Opentuition for your help. 🙂

[yuska]

this similar question to March 2019 FR exam Section C.
I have tried to solve it but I dont know how to solve this problem.

[yuska]

Thank you very much

[yuska]

thanks for your answer!

[yuska]

thanks

[yuska]

Thanks a lot.

[yuska]

HI dear tutor,

I think that there is contrast between two questions in BPP revision kit.

Question:146

Jarvis owns 30% of McLintock. During the year to 31 December 20X4 McLintock sold $2 million of goods to Jarvis, of which 40% were still held in inventory by Jarvis at the year end. McLintock applies a mark-up of 25% on all goods sold. What effect would the above transactions have on group inventory at 31 December 20X4?
A Debit group inventory $48,000
B Debit group inventory $160,000
C Credit group inventory $48,000
D No effect on group inventory

Answer: C

Explanation
(($2m × 40%) × 25 / 125) × 30% = $48,000 This adjustment is removing profit from inventory so it is a credit entry

Question:155

Plateau acquired 30% of the equity shares of Axle at a cost of $7.50 per share in cash.

Plateau is negotiating a contract to supply goods to Axle in the coming year (ended 30 September 20X8) at 20% profit. How will the unrealised profit on the sale of these goods be adjusted in the consolidated financial statements for the year ended 30 September 20X8?

A DR Share of profit of associates CR Group inventory
B DR Share of profit of associates CR Investment in associate
C DR Group inventory CR Share of profit of associate
D DR Investment in associate CR Share of profit of associate

Answer: B

Explanation

Axle is not a member of the group, so group inventory is unaffected.

In BPP study text there is the following NOTE

“Note that if the sale had been made by the associate to the group (an upstream transaction) the posting would have been exactly the same.”

DEBIT Share of profit of associate (consolidated profit or loss)
CREDIT Investment in associate (consolidated statement of financial position)

Thereby I think that transactions between Jarvis Co and Mclintock Co will not affect the group inventry. Do you agree me?

[yuska]

Thanks for clear answer!

[yuska]

Thank your reply. ? am grateful

[yuska]

thanks a lot.
I will take into account your suggestion.

[yuska]

Hi Mr. John Moffat

I have some trouble understanding this question.

The cash book shows a bank balance of $5,675 overdrawn at 31 August 20X5. It is subsequently discovered that a standing order for $125 has been entered twice, and that a dishonored cheque for $450 has been debited in the cash book instead of credited.

My answer is 6000 overdrawn. Because if bank dishonored the cheque for 450$, then why we dont reduce credit side of cashbook?

[Author]

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