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Hello Sir,
Why in the following question of associate they recognized the pup even though it is telling that all the goods transferred had been sold ,so why we have to deduct the pup,
Thanks,
——————————————————————————————————————————
Green is an associate undertaking of Purple. Purple owns 30% of the sharesin Green, and has
done so for many years.
During the year ended 31 December 20X4, Green made a net profit of $1.5 million Green sold
goods to Purple during the year with a value of $2 million, and half are still in Purple’s
inventories at year end All the goods were sold at a margin of 30%.
Purple has recognised previous impairments in relation to its investment in Green of
$225,000 In the current year, Purple wishes to recognise an additional impairment charge of
$35,000.
What is the share of profit of associate to be shown in Purple’s consolidated statement of
profit or loss?
$____________ ,000Answer
$325,000
$
Share of Net Profit: 30% × 1,500,000 450,000
Share of PUP: 30% × ((2m × 50%) × 30%) (90,000)
Current year impairment (35,000)
Total 325,000Hi,
Read the question carefully. It says half the goods are still in inventory, so will not have been sold.
Thanks.
Hello Sir,
Yes it is telling like that but what about the next sentence which says (at year end All the goods were sold at a margin of 30% )
little bit confusing ,
Thanks,
That bit is just telling you that the goods were sold between the group members at the margin of 30%.
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