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Parent sells to sub goods at 120,000, which cost the 100,000. at the year end, there was no inventory left but there was a receivable of 20,000 still owed to the parent.
how shd this be treated in consolidated balance sheet?
a. remove 20,000 from receivalbe and payables AND remove PURP
b. just remove 20,000 from receivables and payables
i said b
is that correct?
Alkemist is wrong – the answer is indeed (b).
Because there is no inventory left at the end of the year there is no unrealised profit and therefore no PURP to remove.
All that need removing is the 20,000 from both receivables and payables.
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