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Hi, I had a doubt in regarding the cash in transit of this question.
Peanut Co has owned 80% of the issued equity share capital of Butter Co for many years. At 31 December 20X9, the individual statements of financial position included the following:
Peanut Co ($) Butter Co ($)
Current assets 500,000 300,000
Current liabilities 150,000 100,000
During the year ended 31 December 20X9, Peanut Co made $60,000 sales on credit to Butter Co. Butter Co had half of these goods in inventory at 31 December 20X9. Peanut Co makes a 20% mark-up on all sales.
On 31 December 20X9, Butter Co sent a cheque for $20,000 to pay all of the outstanding balance due to Peanut Co. Peanut Co did not receive this cheque until 3 January 20Y0.
Peanut Co’s policy for in-transit items is to adjust for them in the parent company and Peanut Co had a bank overdraft at 31 December 20X9.
In respect of current assets and current liabilities, what amounts will be reported in Peanut Co’s consolidated statement of financial position at 31 December 20X9?
Current Assets $745,000 and current liabilities $200,000
How may I eliminate the Interco receivable and payable here, I can’t see any info on this ?
Thank you so much.
It says that the payment of $20,000 is for all of the outstanding balance, so there won’t be any outstanding i/co balances to eliminate following the recording of the cash in transit.