- April 3, 2021 at 12:20 am #615790Noah098Member
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sir can you explain why chris passed the journal entry Dr. Retained earnings X Cr. Inventory X ?? when associate sells us inventory which is unrealised at the reporting date(wholly or partially). I mean retained earnings needed to be debited by the amount that is equal to unrealised profits, while inventory needs to be credited by an amount equal to cost of unrealised goods/inventory.
So, this entry means if Associate transfers inventory at $120, whose cost is $100, and PUP=$12 then its understandable that combined earnings will fall by $12 but the cost of inventory will still be $108 for parent, when it should have been $100 given that the associate got it for $100!
I know its F7 stuff, but if you could still help!
sorry for asking F7 stuff!April 3, 2021 at 12:10 pm #615829Stephen WidbergKeymaster
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Associate PUP is F7 as you say.
1. Calculate PUP
2. Take group share.
3. Then Dr RE and Cr Inventory or Cr Investment in Associate
Unlike subs there is no real consistency with associate PUPs – in reality they are unlikely to be material.
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