229 Perkins Co Mar Jun 2018

This topic has 3 replies, 3 voices, and was last updated 5 years ago by P2-D2.

Viewing 4 posts - 1 through 4 (of 4 total)

Author

Posts
January 30, 2021 at 2:17 am #608525
whateveritis
Member
- Topics: 11
- Replies: 5
Dear tutors,

I have one problem with this question:
During the period from 1 January 20X7 to 1 September 20X7, Perkins Co sold $1m of goods to Swanson Co at a margin of 30%. Swanson Co had sold all of these goods on to third parties by 1 September 20X7.
In the BPP book, the answer is like this:
Cost of sales (23,980 – 4,400 (6600 * 8/12)) (19580)
Why don’t they add back the COS 700 for this?

I am looking forward to receiving your answer.
Thanks a lot.
February 2, 2021 at 6:23 pm #608884
P2-D2
Keymaster
- Topics: 4
- Replies: 7235
Hi,

As all of the goods have been sold by the reporting date the profit on them has been realised and therefore no PUP adjustment is required.

Thanks
February 3, 2021 at 9:05 am #608927
mainai92
Participant
- Topics: 11
- Replies: 17
Hi Tutor, same question for me.

Normally consolidated IS will be

Revenue – deduct intra-sales
COS – deduct intra-sales + PUP.

if now PUP is 0, don’t we need to add back both intra-sales in Rev and COS?
February 8, 2021 at 8:19 pm #609710
P2-D2
Keymaster
- Topics: 4
- Replies: 7235
No, you need to be very careful. The intra-group sale is always eliminated regardless of whether there are good remaining in inventory at the reporting date.
Author

Posts

Viewing 4 posts - 1 through 4 (of 4 total)

You must be logged in to reply to this topic.