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The following figures related to Sanderstead Co and its subsidiary Croydon Co for the year ended 31 Dec 20X9.
Sanderstead Co:
Revenue $600,000
Cost of Sales ($400,000)
Gross profit $200,000Croydon Co:
Revenue $300,000
Cost of Sales ($200,000)
Gross profit $100,000During the year Sanderstead Co sold goods to Croydon Co for $20,000, making a profit of $5,000
These goods were all sold by Croydon Co before the year end.What are the amounts for total revenue and gross profit in the consolidated income statement of Sanderstead Co for the year ended 31 Dec 20X9?
The Answer given is Revenue: $880,000; Gross Profit: $300,000
But i suspect the answer given is wrong it should be Revenue: $880,000; Gross Profit: $295,000Are there anyone can help?
Is this really an F3 question!
Revenue (600,000+300,000–20,000) 880,000
COS (400,000+200,000-20,000) 580,000
G.P 300,000If you can show your workings I will be able to show you where you’re going wrong.
I suspect you’re deducting £5000 for the Provision of Unrealisable Profit P.U.P. You would be correct if the entire stock, that was purchased from Santerstead, were still in inventory at the year-end, but Croydon sold all of that stock. Therefore, we do not deduct P.U.P.
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