- This topic has 1 reply, 2 voices, and was last updated 3 years ago by .
Viewing 2 posts - 1 through 2 (of 2 total)
Viewing 2 posts - 1 through 2 (of 2 total)
- You must be logged in to reply to this topic.
OpenTuition recommends the new interactive BPP books for June 2024 exams, Get your discount code >>
Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Accounting for Associates
Hi SIr!
Ulysses owns 25% of Grant, which it purchased on 1 May 20X8 for $5 million. At that date Grant had
retained earnings of $7.4 million. At the year end date of 31 October 20X8 Grant had retained earnings of
$8.5 million after paying out a dividend of $1 million. On 30 September 20X8 Ulysses sold $600,000 of
goods to Grant, on which it made 30% profit. Grant had resold none of these goods by 31 October.
At what amount will Ulysses record its investment in Grant in its consolidated statement of financial position at
31 October 20X8?
Cost of investment – 5,000
Share of post-acquisition profit (8,500 – 7,400) × 25%) – 275
PURP (600 × 30% × 25%) – (45)
5,230
Why in order to find PURP we multiplied to 30% (why not 70%), if it’s provision for “unreleased” profit
Hi,
We eliminate our share of the profit as that is the amount of influence that we have over the associate. As we own 30% then we will eliminate 30% of the profit.
Thanks