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Hi Sir,
I have been studying the solution of latest bpp revision kit question 121 Paradigm pg 37, and have a few parts that I do not understand.
Firstly, I just could not get my head around to the figures on the solution relating to financial asset: equity investments (7,100 + 3,900). I have no idea where those figures came from.
and also, I am not quite sure why the solution deducted 600 from inventory under current assets, as I thought it should have been added as it has not been sold to the third party, still remaining in the group?
lastly, working 4 of the solution *Loss on equity investments in Paradigm: (7,500 – 7,100)… I do not understand where this came from..
Hope you can clarify those shortly.
Kindest regards.
Inyoung
$7,100 and $3,900????????
They’re given in the notes to the question!!!!
$600 is the provision for unrealised profits – that means that group inventory is overvalued by $600. It IS added to cost of sales in order to reduce the profits
The question tells you in the original figures that the financial asset is worth $7,500 and note (v) tells you that that financial asset is only worth $7,100 at the year end
Have you read the question?
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